<PAGE>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-5540
PEOPLES ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
ILLINOIS 36-2642766
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
122 SOUTH MICHIGAN AVENUE, CHICAGO, ILLINOIS 60603
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 431-4000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name on each exchange
Title of Each Class on which registered
------------------------------- -----------------------
Common Stock, without par value New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (#229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. X
---
State the aggregate market value of the voting stock held by non-affiliates of
the registrant:
Approximately $855 million computed on the basis of the closing market
price of $24.50 for a share of Common Stock on November 30, 1994.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, without par value, 34,898,353 shares outstanding at
November 30, 1994.
DOCUMENTS INCORPORATED BY REFERENCE
Document Part of Form 10-K
-------- -----------------
Portions of the Company's Notice of Annual Meeting and
Proxy Statement to be filed on or about December 30, 1994 Part III
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<PAGE>
CONTENTS
Page
Item No. No.
- -------- ----
PART I
1. Business 3
2. Properties 10
3. Legal Proceedings 10
4. Submission of Matters to a Vote of Security Holders 10
Executive Officers of the Company 11
PART II
5. Market for the Company's Common Stock and Related
Stockholder Matters 13
6. Selected Financial Data 14
7. Management's Discussion and Analysis of Results
of Operations and Financial Condition 15
8. Financial Statements and Supplementary Data 22
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 49
PART III
10. Directors and Executive Officers of the Company 51
11. Executive Compensation 51
12. Security Ownership of Certain Beneficial Owners and
Management 51
13. Certain Relationships and Related Transactions 51
PART IV
14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 52
Signatures 58
Exhibit Index 59
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<PAGE>
PEOPLES ENERGY CORPORATION
ANNUAL REPORT ON FORM 10-K
FISCAL YEAR ENDED SEPTEMBER 30, 1994
PART I
ITEM 1. BUSINESS
GENERAL
Peoples Energy Corporation (Company) is solely a holding company and does
not engage directly in any business of its own. Income is derived principally
from the Company's utility subsidiaries, The Peoples Gas Light and Coke Company
(Peoples Gas) and North Shore Gas Company (North Shore Gas).
The Company was incorporated in 1967 under the Illinois Business
Corporation Act and has its principal executive offices at 122 South Michigan
Avenue, Chicago, Illinois 60603 (Telephone [312] 431-4000). The Company has no
employees of its own.
Peoples Gas, an operating public utility, is engaged primarily in the
purchase, production, storage, distribution, sale, and transportation of natural
gas. It has approximately 842,000 residential, commercial, and industrial
retail sales and transportation customers within the City of Chicago (City).
Peoples Gas had 3,031 employees at September 30, 1994.
North Shore Gas, an operating public utility, is engaged primarily in the
purchase, storage, distribution, sale, and transportation of natural gas. It
has more than 129,000 residential, commercial, and industrial retail sales and
transportation customers within its service area of approximately 275 square
miles, located in Northeastern Illinois. North Shore Gas had 247 employees at
September 30, 1994.
Peoples District Energy Corporation (Peoples District Energy), a wholly
owned subsidiary of the Company, is a 50 percent participant in a partnership
formed to provide heating and cooling services to the McCormick Place exposition
and convention center in Chicago, Illinois and other large buildings near
McCormick Place. Neither the partnership nor any of its partners is regulated
as a public utility. (See Note 5 of the Notes to Consolidated Financial
Statements.)
Two other wholly owned subsidiaries of the Company are: Peoples Energy
Services Corporation (Peoples Energy Services) and Peoples NGV Corp. Peoples
Energy Services' operations consist of the sale and distribution of carbon
monoxide detectors. Peoples NGV Corp. is a participant in a partnership that
was formed to develop on-site fueling services for natural gas-powered fleet
vehicles. Neither the partnership nor any of its partners is regulated as a
public utility.
COMPETITION
Peoples Gas and North Shore Gas are authorized by statute and/or
certificates of public convenience and necessity to conduct operations in the
territories they serve. In addition, these subsidiaries operate under
franchises and license agreements granted them by the communities they serve.
Peoples Gas holds a perpetual, non-exclusive franchise from the City. North
Shore Gas' franchises with communities within its service territory are of
various terms and expiration dates.
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<PAGE>
ITEM 1. BUSINESS (Continued)
COMPETITION (Continued)
Absent extraordinary circumstances, potential competitors are barred from
constructing competing gas distribution systems in the utility subsidiaries'
service territories by a judicial doctrine known as the "first in the field"
doctrine. In addition, the high cost of installing duplicate distribution
facilities would render the construction of a competing system impractical.
Competition in varying degrees exists between natural gas and other fuels
or forms of energy available to consumers in Peoples Gas' and North Shore Gas'
service areas. The capital cost of heating and cooling facilities in new high-
rise buildings is higher for gas than for electricity. This circumstance,
combined with stagnant high-rise construction activity, has adversely affected
the ability of Peoples Gas to attach commercial high-rise buildings. However,
Peoples Gas has had some success in attaching high-rise residential buildings,
as gas heating results in lower operating costs.
A substantial portion of the gas that Peoples Gas and North Shore Gas
deliver to their customers consists of gas that the subsidiaries' customers
purchase directly from producers and marketers rather than from the
subsidiaries. These direct customer gas purchases have no effect on net income
because the utilities provide transportation service for such gas volumes and
recover margins similar to those applicable to conventional gas sales.
A pipeline may seek to provide transportation service directly to end-
users. Such direct service by a pipeline to an end-user would bypass the local
distributor's service and reduce the distributor's earnings. However, none of
the subsidiaries' pipeline suppliers has undertaken any service bypassing the
subsidiaries. Both utility subsidiaries have a bypass rate approved by the
Illinois Commerce Commission (Commission) which allows the utilities to
renegotiate rates with customers that are potential bypass candidates.
Peoples District Energy intends to compete in the heating and cooling
market through a partnership that will offer unregulated district energy
services for large buildings. (See Note 5 of the Notes to Consolidated
Financial Statements.)
Peoples Energy Services competes in the sale and distribution of carbon
monoxide detectors to wholesale and retail customers and is considering entry
into other lines of unregulated business in the future. Peoples NGV Corp.
intends to compete, through a partnership, in the development of unregulated on-
site fueling services for natural gas-powered fleet vehicles.
SALES AND RATES
Peoples Gas and North Shore Gas sell natural gas having an average heating
value of approximately 1,000 British thermal units (Btu's) per cubic foot.*
Sales are made and service rendered by Peoples Gas and North Shore Gas pursuant
to rate schedules on file with the Commission containing various service
classifications largely reflecting customers' different uses and levels of
consumption. The Gas Charge is determined in accordance with the provisions in
Rider 2, Gas Charge and Refund Adjustments, to recover the costs incurred by
Peoples Gas and North Shore Gas to purchase, transport, manufacture, and store
gas supplies. The level of the Gas Charge under both subsidiaries' rate
schedules is adjusted monthly to reflect increases or decreases in natural gas
supplier charges, purchased storage service costs, transportation charges,
liquefied petroleum gas costs, and feedstock costs for synthetic natural gas
(SNG). In addition, under the tariffs of Peoples Gas and North Shore Gas, the
difference for any fiscal year between costs
- -------------------------------------------------------------------------------
* All volumes of natural gas set forth in this report are stated on a 1,000 Btu
(per cubic foot) billing basis.
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<PAGE>
ITEM 1. BUSINESS (Continued)
SALES AND RATES (Continued)
recoverable through the Gas Charge and the revenues billed to customers under
the Gas Charge is refunded or recovered over a 12-month billing cycle beginning
the following January 1. Consistent with these tariff provisions, such
difference for any month is recorded either as a current liability or a current
asset (with a contra entry to gas costs), and the fiscal year-end balance is
amortized over the 12-month period beginning the following January 1. Peoples
Gas and North Shore Gas have been recovering, through their rates, pipeline
charges billed for transition costs resulting from the implementation of Federal
Energy Regulatory Commission (FERC) Order No. 636. (See Notes 1H, 2A, and 2B of
the Notes to Consolidated Financial Statements.)
The business of the Company's utility subsidiaries is influenced by
seasonal weather conditions because a large element of the subsidiaries'
customer load consists of space heating. Weather-related deliveries can,
therefore, have a significant positive or negative impact on net income. (For
discussion of the effect of the seasonal nature of gas sales on cash flow, see
"Liquidity" in Item 7.)
The basic marketing plans of Peoples Gas and North Shore Gas are to
maintain their existing shares in all market segments and develop opportunities
emerging from changes in the utility environment and technological advances in
new, expanded, or current natural gas applications, including cogeneration,
prime movers, natural gas-fueled vehicles, and air conditioning.
STATE LEGISLATION AND REGULATION
Peoples Gas and North Shore Gas are subject to the jurisdiction of and
regulation by the Commission, which has general supervisory and regulatory
powers over practically all phases of the public utility business in Illinois,
including rates and charges, issuance of securities, services and facilities,
systems of accounts, investments, safety standards, transactions with affiliated
interests, as defined in the Illinois Public Utilities Act, and other matters.
On October 6, 1992, the Commission issued an order approving changes in the
rates of Peoples Gas that were designed to increase annual revenues by
approximately $30.6 million, exclusive of additional charges for revenue taxes.
The new rates were implemented on October 10, 1992. Peoples Gas was allowed a
10.40 percent return on its original-cost rate base, reflecting a 12.25 percent
cost of common equity. The Commission's order also approved a rate mechanism by
which Peoples Gas will recover costs associated with environmental activities,
relating to past manufactured gas operations (see discussion below). (See Note
2A of the Notes to Consolidated Financial Statements.)
On September 30, 1992, the Commission issued an order in its consolidated
proceedings, initiated in March 1991, regarding the appropriate ratemaking
treatment of environmental costs relating to past manufactured gas operations
incurred by Illinois utilities, including Peoples Gas and North Shore Gas, in
connection with the investigation and treatment of residues associated with past
manufactured gas operations ("environmental costs"). In its order, the
Commission approved rate recovery of such environmental costs but required that
the recovery occur over a five-year period without recovery of carrying charges
on unrecovered balances. The Commission's order is on appeal before the
Illinois Supreme Court. (See Note 2A of the Notes to Consolidated Financial
Statements.)
On September 15, 1993, the Commission entered an order initiating an
investigation into the appropriate means of recovery by Illinois gas utilities
of pipeline charges for FERC Order No. 636 transition costs. The Commission
issued its orders on rehearing in this proceeding in September 1994. (See Notes
1H, 2A, and 2B of the Notes to Consolidated Financial Statements.)
-5-
<PAGE>
ITEM 1. BUSINESS (Continued)
On December 16, 1994, Peoples Gas filed with the Commission proposed
changes in rates that are designed to increase annual revenues by about
$59.9 million, exclusive of additional charges for revenue taxes. Peoples Gas
is seeking a rate of return on original-cost rate base of 10.03 percent, which
reflects a 12.7 percent cost of common equity. Peoples Gas expects that the
Commission, following its usual practices, will not issue a decision regarding
Peoples Gas' filed rate increase request until November 1995. Peoples Gas
cannot predict the outcome of its rate increase request.
On December 16, 1994, North Shore Gas filed with the Commission proposed
changes in rates that are designed to increase annual revenues by about
$10.1 million, exclusive of additional charges for revenue taxes. North Shore
Gas is seeking a rate of return on original-cost rate base of 10.50 percent,
which reflects a 12.6 percent cost of common equity. North Shore Gas expects
that the Commission, following its usual practices, will not issue a decision
regarding North Shore Gas' filed rate increase request until November 1995.
North Shore Gas cannot predict the outcome of its rate increase request.
FEDERAL LEGISLATION AND REGULATION
The Company is a holding company as defined in the Public Utility Holding
Company Act of 1935 (Act). By Order entered on December 6, 1968 (Holding
Company Act Release No. 16233), the Securities and Exchange Commission, pursuant
to Section 3(a)(1) of the Act, exempted the Company and its subsidiary companies
as such from the provisions of the Act, other than Section 9(a)(2) thereof.
Most of the gas distributed by Peoples Gas and North Shore Gas is
transported to the utilities' distribution systems by interstate pipelines. In
their provision of gas sales services (gathering, transportation and storage
services, and gas supply) pipelines are regulated by the FERC under the Natural
Gas Act and the Natural Gas Policy Act of 1978. (See "Sales and Rates" and
"Current Gas Supply" in Item 1.)
The Company and its subsidiaries are subject to federal and state
environmental laws. Peoples Gas and North Shore Gas are conducting
environmental investigations and work at certain sites that were the location of
former manufactured gas plant operations. (See Note 3A of the Notes to
Consolidated Financial Statements.) In addition, North Shore Gas has received a
demand for payment of environmental response costs at a former mineral
processing site in Denver, Colorado. (See Note 3B of the Notes to Consolidated
Financial Statements.)
In 1992, the FERC issued Order No. 636 and successor orders that required
substantial restructuring of the service obligations of interstate pipelines.
(See Notes 1H, 2A, and 2B of the Notes to Consolidated Financial Statements.)
ENVIRONMENTAL MATTERS
See Note 3 of the Notes to Consolidated Financial Statements.
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<PAGE>
ITEM 1. BUSINESS (Continued)
CURRENT GAS SUPPLY
Peoples Gas and North Shore Gas have each entered into long- and short-term
firm gas supply contracts. When used in conjunction with contract storage,
Peoples Gas' company-owned storage, and peak-shaving facilities, as shown in the
following table, such supply is deemed sufficient to meet current and
foreseeable peak and annual market requirements. SNG production is a source of
Peoples Gas' annual, peak-season, and peak-day supply. The SNG plant is run at
production levels that are consistent with orders of the Commission. The
feedstock for the SNG plant is procured via firm supply contracts and spot
purchases, as required. The current feedstocks are primarily ethane and
refinery fuel gas, with naphtha and natural gasoline used for peaking.
Although the Company believes North American supply to be sufficient to
meet U.S. market demands for some time, it is unable to quantify or otherwise
make specific representations regarding national supply availability.
The following tabulation shows the expected peak-day availability of gas in
million cubic feet (MMcf) during the 1994-95 heating season for Peoples Gas and
North Shore Gas:
<TABLE>
<CAPTION>
Peoples Gas North Shore Gas
-------------------------------- --------------------------------
Peak-Day Year of Peak-Day Year of
Availability Contract Availability Contract
Source (MMcf) Expiration (MMcf) Expiration
- ------------------- ------------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Flow Gas
Firm Gas Purchases 540(a) 1995-1998(a) 125(a) 1995-1998(a)
Synthetic Natural Gas 170(b) --
Liquefied Petroleum Gas 40 59
--- ---
750 184
--- ---
Storage Gas
Leased 793(c) 1995-1996(c) 122(d) 1995-1996(d)
Peoples Gas - Manlove Storage 993(e) 87(e) (f)
----- ---
1,786 209
----- ---
Total expected peak-day
availability 2,536 393
----- ---
----- ---
<FN>
(a) Consists of firm gas purchases from non-pipeline suppliers delivered via
firm pipeline transportation. Under the 636 Orders' right-of-first-refusal
process, Peoples Gas and North Shore Gas may retain the firm transportation
contract capacity if it matches the best bid made for that capacity in
terms of rate (up to the maximum rate permitted) and contract length (up to
20 years).
(b) Peoples Gas' SNG plant has a design peak-day production capability of 170
MMcf. Feedstock contracts for the plant expire during the period 1995-
1997. (See "Synthetic Natural Gas Supply" in Item 1.)
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<PAGE>
ITEM 1. BUSINESS (Continued)
CURRENT GAS SUPPLY (Continued)
(c) Peoples Gas has maximum storage service withdrawal capacity under contracts
with Natural Gas Pipeline Company of America (Natural) of (1) 554 MMcf per
day in the period November 1 through February 15, decreasing to 449 MMcf
per day until February 28 and to 343 MMcf per day for the balance of the
withdrawal season, under a service agreement extending until 1995, (2) 69
MMcf per day under a service agreement extending until 1995, (3) 46 MMcf
per day under a service agreement extending until 1995, (4) 24 MMcf per day
under a service agreement extending until 1995, (5) 59 MMcf per day,
including transportation fuel, under a service agreement extending until
1996, and (6) including transportation fuel, 65 MMcf per day in November,
decreasing to 60 MMcf per day in December, 45 MMcf per day in January and
30 MMcf per day in February and March, under a service agreement extending
until 1995. All daily withdrawals under the foregoing seasonal and
interseasonal agreements are subject to maximum withdrawal constraints.
Before terminating any of the services noted in (1) through (4) above,
Natural must first seek authority from FERC. The service noted in (5) and
(6) are subject to the 636 Orders' right-of-first-refusal process. Under
this process, Peoples Gas may retain the storage capacity if it matches the
best bid made for that capacity in terms of rate (up to the maximum rate
permitted under Natural's tariff) and contract length (up to 20 years).
(d) North Shore Gas has maximum storage service withdrawal capacity under
contracts with Natural of (1) 56 MMcf per day in the period November 1
through February 15, decreasing to 45 MMcf per day until February 28 and to
34 MMcf per day for the balance of the withdrawal season, under a service
agreement extending until 1995, (2) 30 MMcf per day under a service
agreement extending until 1995, (3) 7 MMcf per day under a service
agreement extending until 1995, (4) 3 MMcf per day under a service
agreement extending until 1995, (5) 22 MMcf per day, including
transportation fuel, under a service agreement extending until 1996, and
(6) including transportation fuel, 6.5 MMcf per day in November, decreasing
to 6 MMcf per day in December, 4.5 MMcf per day in January and 3 MMcf per
day in February and March, under a service agreement extending until 1995.
All daily withdrawals under the foregoing seasonal and interseasonal
agreements are subject to maximum withdrawal constraints. Before
terminating any of the services noted in (1) through (4) above, Natural
must first seek authority from FERC. The services noted in (5) and (6) are
subject to the 636 Orders' right-of-first-refusal process. Under this
process, North Shore Gas may retain the storage capacity if it matches the
best bid made for that capacity in terms of rate (up to the maximum rate
permitted under Natural's tariff) and contract length (up to 20 years).
(e) Manlove Field, Peoples Gas' underground storage facility located near
Champaign, Illinois, has a seasonal top-gas capacity (excluding volumes
required to support late-season peaking requirements) of approximately
33,000 MMcf, of which approximately 2,884 MMcf is dedicated to North Shore
Gas. Peoples Gas also owns a liquefied natural gas (LNG) plant at Manlove
Field for the primary purpose of supporting late-season deliverability from
the storage facility. The LNG plant has a storage capacity of 2,000 MMcf
and is capable of regasifying 300 MMcf of gas per day. For the 1994-95
heating season, Manlove Field will have a maximum peak-day delivery
capability of approximately 1080 MMcf (including 87 MMcf for the use of
North Shore Gas).
(f) The contract with Peoples Gas was for an initial term expiring May 1, 1990.
However, by its terms, the contract continues in effect unless canceled by
either party upon 120 days' notice prior to April 30 of any year
thereafter.
</TABLE>
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<PAGE>
ITEM 1. BUSINESS (Continued)
CURRENT GAS SUPPLY (Continued)
The sources of gas supply (including gas transported for customers) in
million cubic feet (MMcf) for Peoples Gas and North Shore Gas for the three
fiscal years ended September 30, 1994, 1993, and 1992, were as follows:
<TABLE>
<CAPTION>
Peoples Gas North Shore Gas
------------------------------- ----------------------------
1994 1993 1992 1994 1993 1992
------- ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Source:
Natural (a) 14,378 63,996 80,743 2,384 12,293 15,758
Midwestern Gas
Transmission Company (b) -- 7,217 6,538 -- -- --
Other Suppliers (c) 134,104 76,006 62,024 23,415 12,296 8,556
Synthetic Natural Gas (d) 8,350 9,723 8,059 -- -- --
Liquefied Petroleum Gas Produced 30 14 2 79 61 7
Customer-Owned Gas - Received 91,187 91,046 87,433 12,017 11,956 12,296
Underground Storage - Net (2,196) (1,762) (1,688) (718) (80) (998)
Company Use, Franchise
Requirements, and
Unaccounted-for Gas (4,261) (4,772) (2,920) (339) (381) (297)
------- ------- ------- ------ ------ ------
Total (e) 241,592 241,468 240,191 36,838 36,145 35,322
------- ------- ------- ------ ------ ------
------- ------- ------- ------ ------ ------
<FN>
(a) The DMQ-1 supply contract terminated on November 30, 1993.
(b) The CD-1 supply contract terminated on August 31, 1993.
(c) The Company purchases significant quantities of gas directly from various
suppliers. Commencing December 1, 1993, purchases were more oriented
towards long-term supply contracts than short-term spot gas. However, some
gas supply is still purchased on a short-term basis whenever such purchases
are projected to produce a savings in gas costs without jeopardizing supply
security and reliability.
(d) See "Synthetic Natural Gas Supply" in Item 1.
(e) See "Gas Sold and Transported" in Item 6.
</TABLE>
SYNTHETIC NATURAL GAS SUPPLY
Peoples Gas owns and operates an SNG plant, the McDowell Energy Center,
located near Joliet, Illinois. The plant can use refinery fuel gas and a
variety of natural gas liquids, including ethane, naphtha, natural gasoline,
normal butane, propane, and ethane/propane mix as feedstock for the production
of SNG. While sufficient annual supplies of natural gas are now available, the
SNG plant remains a key part of Peoples Gas' annual, peak-season, peak-day, and
longer-term gas supply assurance program.
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<PAGE>
ITEM 2. PROPERTIES
All of the principal plants and properties of Peoples Gas and North Shore
Gas have been maintained in the ordinary course of business and are believed to
be in satisfactory operating condition. The distribution facilities serve the
City and other areas in Northeastern Illinois. In addition to the SNG plant
mentioned in Item 1, Peoples Gas owns and operates an underground gas storage
reservoir and an LNG plant at Manlove Field located near Champaign, Illinois.
Peoples Gas also owns a transmission system that transports gas from Manlove
Field to Chicago. The underground storage reservoir and LNG plant also serve
North Shore Gas. General properties include a substantial investment in office
and service buildings, garages, repair shops, and motor vehicles, together with
the equipment, tools, and fixtures necessary to conduct utility business.
Most of the principal plants and properties of Peoples Gas and North Shore
Gas, other than mains, services, meters, regulators, and cushion gas in
underground storage, are located on property owned in fee. Substantially all
gas mains are located under public streets, alleys, and highways, or under
property owned by others under grants of easements. Meters and house regulators
in use and a portion of services are located on premises being served. Certain
SNG facilities, certain storage wells and other facilities of the Manlove Field
storage reservoir, and certain portions of the transmission system are located
on land held pursuant to leases, easements, or permits.
Substantially all of the physical properties now owned or hereafter
acquired by Peoples Gas and North Shore Gas are subject to (a) the first-
mortgage lien of each company's mortgage to Bank of America Illinois, (formerly
named Continental Bank, National Association) Trustee, to secure the principal
amount of each company's outstanding first mortgage bonds, respectively, and (b)
in certain cases, other exceptions and defects that do not interfere with the
use of the property.
ITEM 3. LEGAL PROCEEDINGS
See Notes 2, 3, and 4 of the Notes to Consolidated Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The following is a list of the names, ages, and positions of the executive
officers of the Company. Executive officers are elected to serve for a term of
one year or until their successors are duly elected and qualified.
Age at
Name 11-30-94 Position with the Company
- ----------------------- -------- -----------------------------------
Kenneth S. Balaskovits 52 Vice President and Controller
(1993).
Mr. Balaskovits is also Vice
President and Controller and
Director (1993) of Peoples Gas and
North Shore Gas. Mr. Balaskovits
has been an employee of the Company
and/or its subsidiaries since 1967.
Emmet P. Cassidy 61 Secretary and Treasurer (1989).
Mr. Cassidy is also Secretary and
Treasurer (1989) of Peoples Gas and
North Shore Gas. Prior to that, he
was Assistant Secretary and
Assistant Treasurer of the Company
and both subsidiaries (1981-1989).
Mr. Cassidy has been an employee of
the Company and/or its subsidiaries
since 1955.
J. Bruce Hasch 56 President and Chief Operating
Officer (1990) and Director (1987)
of the Company.
Mr. Hasch is also President and
Chief Operating Officer (1990) and a
Director (1986) of Peoples Gas and
North Shore Gas. Prior to becoming
President, Mr. Hasch was Executive
Vice President (1985-1990) of the
Company and its subsidiaries and
Vice President (1981-1985) of both
subsidiary companies. Mr. Hasch has
been an employee of the Company
and/or its subsidiaries since 1960,
including 16 years with Natural Gas
Pipeline Company of America, a
former subsidiary.
James Hinchliff 54 Senior Vice President and General
Counsel (1989) of the Company.
Mr. Hinchliff is also Senior Vice
President and General Counsel (1989)
and a Director (1985) of Peoples Gas
and North Shore Gas. Prior to that,
he was Vice President and General
Counsel (1984-1989) of the Company
and of both subsidiaries, and he was
Assistant General Counsel of the
Company (1979-1984) and of both
subsidiaries (1981-1984). Mr.
Hinchliff has been an employee of
the Company and/or its subsidiaries
since 1972.
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<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY (Continued)
Age at
Name 11-30-94 Position with the Company
- ----------------------- -------- -----------------------------------
Michael S. Reeves 59 Executive Vice President (1987) and
Director (1991) of the Company.
Mr. Reeves is also Executive Vice
President (1987) and Director (1988)
of Peoples Gas and North Shore Gas.
Prior to becoming Executive Vice
President, Mr. Reeves was Vice
President (1977-1987) of both
subsidiaries. Mr. Reeves has been
an employee of the Company and/or
its subsidiaries since 1956.
Richard E. Terry 57 Chairman of the Board and Chief
Executive Officer (1990) and
Director (1984) of the Company.
Mr. Terry is also Chairman of the
Board and Chief Executive Officer
(1990) and a Director (1982) of
Peoples Gas and North Shore Gas.
Prior to becoming Chairman, Mr.
Terry was President and Chief
Operating Officer (1987-1990),
Executive Vice President (1984-
1987), and Vice President and
General Counsel (1981-1984) of the
Company and its subsidiaries. Mr.
Terry has been an employee of the
Company and/or its subsidiaries
since 1972.
-12-
<PAGE>
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The common stock of the Company is listed on the New York, Chicago, and
Pacific Stock Exchanges (trading symbol: PGL). As of November 30, 1994, there
were 28,922 registered stockholders.
The common stock price range and dividends declared per common share by
quarters for fiscal 1994, 1993, and 1992, are as follows:
<TABLE>
<CAPTION>
Stock Price
Fiscal ---------------------------------- Dividends
Quarters High Low Close Declared
-------- ------- -------- ------- ---------
<S> <C> <C> <C> <C>
1994
Fourth $27-3/8 $23-5/16 $26-1/4 $.45
Third 31-1/4 23-3/8 23-3/8 .45
Second 32-1/8 27 27-3/8 .45
First 32-1/2 27-1/2 30-1/2 .445
1993
Fourth $35 $31-3/8 $31-7/8 $.445
Third 33-1/4 29-3/8 32-3/8 .445
Second 33 29 31-3/8 .445
First 31-1/2 29-1/2 30-1/8 .44
1992
Fourth $31-5/8 $26 $31-1/4 $.44
Third 27 24-3/4 26-1/4 .44
Second 27-1/8 24-3/8 25-5/8 .44
First 28-1/4 25-3/8 26-5/8 .43
</TABLE>
-13-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For fiscal years ended September 30, 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMON STOCK INFORMATION
Earnings per share $2.13 $2.11 $2.06 $2.05 $2.07
Cash dividends declared per share $1.795 $ 1.775 $1.75 $ 1.705 $ 1.645
Book value per share at year-end $18.39 $18.05 $17.72 $16.95 $16.61
Average shares outstanding (thousands) 34,854 34,809 34,151 32,741 32,672
- ------------------------------------------------------------------------------------------------------------------------
OPERATING RESULTS (thousands)
Operating Revenues:
Residential $951,037 $929,407 $784,677 $791,758 $813,620
Commercial 160,912 156,377 132,456 144,135 169,962
Industrial 41,979 41,354 34,595 41,355 59,802
Transportation of customer-owned gas (a) 110,128 117,949 132,745 115,720 111,031
Other 15,432 13,854 12,279 10,735 10,753
- ------------------------------------------------------------------------------------------------------------------------
Total Operating Revenues $1,279,488 $1,258,941 $1,096,752 $1,103,703 $1,165,168
Gas costs 669,039 646,351 531,845 564,899 620,081
Revenue taxes 132,734 131,673 118,265 118,640 129,290
- ------------------------------------------------------------------------------------------------------------------------
Net Operating Revenues $477,715 $480,917 $446,642 $420,164 $415,797
Net Income $74,399 $73,375 $70,384 $66,975 $67,516
- ------------------------------------------------------------------------------------------------------------------------
ASSETS AT YEAR-END (thousands)
Property, plant and equipment $2,019,379 $1,950,981 $1,843,603 $1,746,851 $1,667,807
Less - Accumulated depreciation 677,447 632,965 599,965 565,626 533,774
- ------------------------------------------------------------------------------------------------------------------------
Net Property, Plant and Equipment $1,341,932 $1,318,016 $1,243,638 $1,181,225 $1,134,033
Total assets $1,809,286 $1,765,870 $1,615,758 $1,541,447 $1,534,188
Capital expenditures - construction $87,218 $131,669 $118,084 $101,563 $103,138
- ------------------------------------------------------------------------------------------------------------------------
CAPITALIZATION AT YEAR-END (thousands)
Common equity $641,378 $628,451 $616,271 $555,199 $543,225
Preferred stock of subsidiaries -- -- 12,850 16,750 20,650
Long-term debt of subsidiaries 626,075 528,075 489,553 493,038 502,224
- ------------------------------------------------------------------------------------------------------------------------
Total Capitalization $1,267,453 $1,156,526 $1,118,674 $1,064,987 $1,066,099
- ------------------------------------------------------------------------------------------------------------------------
FINANCIAL RATIOS (percent)
Capitalization at Year-end:
Common equity 51 54 55 52 51
Preferred stock of subsidiaries -- -- 1 2 2
Long-term debt of subsidiaries 49 46 44 46 47
- ------------------------------------------------------------------------------------------------------------------------
Total Capitalization 100 100 100 100 100
Return on common equity at year-end 11.6 11.7 11.4 12.1 12.4
- ------------------------------------------------------------------------------------------------------------------------
GAS SOLD AND TRANSPORTED (million cubic feet)
Gas Sales:
Residential 142,876 144,199 142,759 137,881 147,175
Commercial 26,206 26,185 26,239 27,429 32,863
Industrial 7,325 7,623 7,330 8,572 11,996
Transportation of customer-owned gas (a) 102,023 99,607 99,185 94,109 86,487
- ------------------------------------------------------------------------------------------------------------------------
Total Sales and Transportation 278,430 277,614 275,513 267,991 278,521
- ------------------------------------------------------------------------------------------------------------------------
NUMBER OF CUSTOMERS (average)
Residential 905,461 904,316 904,374 901,112 898,984
Commercial 50,955 50,736 50,567 49,676 49,322
Industrial 3,927 4,069 3,938 3,870 4,107
Transportation (a) 10,247 9,734 9,500 9,963 9,068
- ------------------------------------------------------------------------------------------------------------------------
Total Customers 970,590 968,855 968,379 964,621 961,481
- ------------------------------------------------------------------------------------------------------------------------
DEGREE DAYS 6,701 6,679 6,320 5,927 6,168
Percent of normal (6,536) 103 102 97 91 94
- ------------------------------------------------------------------------------------------------------------------------
<FN>
(a) Includes commercial, industrial, and larger residential customers.
</TABLE>
-14-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
NET INCOME
Net income applicable to common stock increased $1.0 million, to $74.4
million, in fiscal 1994 from 1993. Results for the current fiscal year include
the recording of one-half of an Internal Revenue Service (IRS) income tax
settlement that increased net income by $10.8 million. (See Note 9 of the Notes
to Consolidated Financial Statements.) However, this benefit was largely offset
by increased operating costs related to the provision for uncollectible
accounts, labor, and depreciation.
In 1993, net income applicable to common stock increased $3.0 million, to
$73.4 million, due principally to a rate increase that went into effect for
Peoples Gas on October 10, 1992. (See Note 2A of the Notes to Consolidated
Financial Statements.) Fiscal 1993 also benefited from colder weather as
compared to fiscal 1992; however, such benefit was offset by a decline in gas
deliveries arising principally from energy conservation measures. Fiscal 1993
was negatively affected by increased operating expenses other than gas costs,
including an increase in the provision for uncollectible accounts. Also, fiscal
1992 included the net gain on the sale of certain property by North Shore Gas.
(See Note 11 of the Notes to Consolidated Financial Statements.)
A summary of variations affecting income between years is presented below,
with explanations of significant differences following:
<TABLE>
<CAPTION>
Fiscal 1994 Fiscal 1993
over 1993 over 1992
------------------ ------------------
Amount Amount
(000's) Percent (000's) Percent
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net operating revenues (a) $(3,202) (0.7) $34,275 7.7
Operation and maintenance expenses 9,930 4.0 20,593 9.0
Depreciation expense 3,877 6.4 3,460 6.0
Income taxes (5,513) (14.7) 3,995 11.9
Other income 14,450 227.7 (4,598) (42.0)
Income deductions 2,199 4.8 (1,824) (3.8)
Net income 1,024 1.4 2,991 4.2
- -------------------------------------------------------------------------------
<FN>
(a) Operating revenues, net of gas costs and revenue taxes.
</TABLE>
NET OPERATING REVENUES
Gross revenues of Peoples Gas and North Shore Gas are affected by changes
in the unit cost of the subsidiaries' gas purchases and do not include the cost
of gas supplies for customers who purchase gas directly from producers and
marketers rather than from the subsidiaries. The direct customer purchases have
no effect on net income because the utilities provide transportation service for
such gas volumes and recover margins similar to those applicable to conventional
gas sales. Changes in the unit cost of gas do not significantly affect net
income because the utilities' tariffs provide for dollar-for-dollar recovery of
gas costs. (See Note 1H of the Notes to Consolidated Financial Statements.) The
utilities' tariffs also provide for dollar-for-dollar recovery of the cost of
revenue taxes imposed by the state and various municipalities.
-15-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION (Continued)
Since income is not significantly affected by changes in revenue from
customers' gas purchases from producers or marketers rather than from the
subsidiaries, changes in gas costs, or changes in revenue taxes, the discussion
below pertains to "net operating revenues" (operating revenues, net of gas costs
and revenue taxes). The Company considers net operating revenues to be a more
pertinent measure of operating results than gross revenues.
Net operating revenues in fiscal 1994 amounted to $477.7 million, virtually
flat as compared with fiscal 1993. Although the weather in January 1994 was
significantly colder than January 1993, the total fiscal 1994 weather impact was
comparable with fiscal 1993. Customers' energy conservation measures had a
negative effect in the current period.
In 1993, net operating revenues increased $34.3 million, to $480.9 million,
due primarily to the impact of the October 1992 rate increase for Peoples Gas
that raised net operating revenues by $32.0 million, or $19.6 million after
income taxes.
OPERATION AND MAINTENANCE EXPENSES
Operation and maintenance expenses increased $9.9 million, to $258.7
million, in 1994, due mainly to an increase in Peoples Gas' provision for
uncollectible accounts and higher labor costs that arose mainly from weather-
related overtime work and from start-up costs for new customer-service programs.
Partially offsetting these items were a reduced workforce and lower employee
benefits expenses for pensions and group insurance. Fiscal 1994 results reflect
an increase of $9.5 million in the provision for uncollectible accounts, which
includes a $3.7 million increase to adjust the balance sheet allowance. Without
the increase in the provision for uncollectible accounts, operation and
maintenance expenses would have increased by $461,000 over fiscal 1993 levels.
In 1993, operation and maintenance expenses increased $20.6 million, to
$248.8 million, due principally to increased group insurance expenses, primarily
attributable to the accrual of postretirement benefit costs of $9.9 million.
(See Note 8B of the Notes to Consolidated Financial Statements.) This is
consistent with the rate treatment allowed Peoples Gas in October 1992. Also,
higher expenses resulted from labor costs, Peoples Gas' provision for
uncollectible accounts, and pension costs.
DEPRECIATION EXPENSE
Depreciation expense increased $3.9 million, to $64.7 million, in 1994, and
$3.5 million, to $60.8 million, in 1993, due chiefly to depreciable property
additions.
-16-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION (Continued)
INCOME TAXES
Income taxes, exclusive of the $3.4 million included in other income
related to an IRS settlement, decreased $5.5 million, to $32.1 million, in 1994,
due principally to lower pre-tax income.
In 1993, income taxes rose by $4.0 million, to $37.6 million, due primarily
to higher pre-tax income and the federal tax rate change from 34 percent to 35
percent effective January 1, 1993.
OTHER INCOME
Other income increased $14.5 million, to $20.8 million, in 1994, due
primarily to recording an IRS settlement of approximately $10.8 million after
income taxes. (See Notes 9 and 11 of the Notes to Consolidated Financial
Statements.) Also, the current fiscal year includes higher interest income
reflecting larger cash balances available for investment and additional interest
income from proceeds being held in a trust fund generated from Peoples Gas'
December 1993 bond issuance. (See Note 14A of the Notes to Consolidated
Financial Statements.)
In 1993, other income decreased $4.6 million, to $6.3 million, due
partially to lower interest income on short-term investments. Also, the prior
fiscal year included the net gain on the North Shore Gas property sale. (See
Note 11 of the Notes to Consolidated Financial Statements.) An offsetting factor
was increased interest on amounts recoverable from customers.
INCOME DEDUCTIONS
Income deductions rose by $2.2 million, to $48.2 million, in 1994, due
primarily to increased interest on long-term debt reflecting additional debt
outstanding. (See Note 14A of the Notes to Consolidated Financial Statements.)
In 1993, income deductions decreased $1.8 million, to $46.0 million, due
chiefly to reduced interest on gas bill credit deposits, budget accounts, and
amounts refundable to customers.
OTHER MATTERS
EFFECT OF WEATHER. Weather variations affect the volumes of gas delivered for
heating purposes and, therefore, can have a significant positive or negative
impact on net income and coverage ratios.
EFFECT OF INFLATION. The utility subsidiaries are affected by inflation through
increases in operating expenses and replacement of utility plant assets at costs
higher than historical costs. Gas costs, the utilities' largest operating cost,
and revenue taxes are recovered dollar-for-dollar in rates. Increases in other
operating costs are recovered through rate cases. Although there is a time lag
in the recovery through rate cases of increased cost levels, the effect of this
lag is mitigated by the use of a future test year in rate decisions. The
utilities recover the cost of depreciable utility property through depreciation
charges based on historical costs. Such charges do not reflect current costs or
inflation-adjusted costs of utility plant. However, the Company believes that
the manner of setting utility rates generally affords an opportunity to earn a
fair return on shareholder investment.
-17-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION (Continued)
ACCOUNTING STANDARDS. In March 1993, the Company adopted, effective October 1,
1992, the liability method of accounting for deferred income taxes required by
Statement of Financial Accounting Standards (SFAS) No. 109. (See Note 1G of the
Notes to Consolidated Financial Statements.)
Effective October 1, 1993, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." This statement
requires the accrual of the expected costs of such benefits during the
employees' years of service. (See Note 8B of the Notes to Consolidated Financial
Statements.)
In November 1992, the Financial Accounting Standards Board (FASB) issued
SFAS No. 112, "Employers' Accounting for Postemployment Benefits." This
statement requires the accrual of certain benefits provided to former or
inactive employees after employment but before retirement. SFAS No. 112 requires
adoption by the Company no later than fiscal 1995. (See Note 8C of the Notes to
Consolidated Financial Statements.)
FERC ORDER 636 COSTS. In 1992, the FERC issued Order No. 636 and successor
orders that required substantial restructuring of the service obligations of
interstate pipelines. (See Notes 1H, 2A, and 2B of the Notes to Consolidated
Financial Statements.)
On September 15, 1993, the Commission entered an order initiating an
investigation into the appropriate means of recovery by Illinois gas utilities
of pipeline charges for FERC Order No. 636 transition costs. The Commission
issued its orders on rehearing in this proceeding in September 1994. (See Notes
1H, 2A, and 2B of the Notes to Consolidated Financial Statements.)
REENGINEERING STUDY. Peoples Gas and North Shore Gas are undertaking a major
project to reengineer their business processes with the goal of increasing
efficiency, responsiveness to customer needs, and cost effectiveness. The
project commenced in September 1994 and is expected to continue for at least two
years.
LIQUIDITY
SOURCE OF FUNDS. The Company has access to outside capital markets and to
internal sources of funds that together provide sufficient resources to meet
capital requirements. It does not anticipate any changes that would materially
alter its current liquidity position.
Due to the seasonal nature of gas usage, a major portion of cash
collections occurs between November and April. Because of timing differences in
the receipt and disbursement of cash and the level of construction requirements,
the utility subsidiaries may borrow on a short-term basis. Short-term
borrowings are repaid with cash from operations, other short-term borrowings, or
refinanced on a permanent basis with debt or equity, depending on capital market
conditions and capital structure considerations.
-18-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION (Continued)
CREDIT LINES. The Company has a line of credit of $10 million that expires
December 16, 1994. The utility subsidiaries have lines of credit of
approximately $131 million. At September 30, 1994, the Company and its utility
subsidiaries had unused credit available from banks of approximately $140
million. (See Note 13 of the Notes to Consolidated Financial Statements.)
CASH FLOW ACTIVITIES. Net cash provided by operating activities in 1994
increased by approximately $83.5 million, due mainly to increases related to net
receivables and rate adjustments recoverable or refundable. Such items were
partially offset by decreases associated with deferred credits and accounts
payable. In 1993, net cash provided by operating activities increased by $15.1
million, due primarily to increases related to deferred credits, deferred
charges, rate adjustments recoverable or refundable, accounts payable, and
accrued taxes. These increases were offset in part by a decrease associated with
net receivables.
Net cash used in investing activities for 1994, 1993, and 1992 mainly
represents the level of capital expenditures in the respective years.
Net cash used in financing activities in 1994 reflects the new debt issues
during the year, primarily used for construction activities. In 1993, net cash
provided by financing activities reflects the debt issuance during the period,
primarily to refund previously issued debt and preferred stock. Net cash used in
financing activities in 1992 reflects the January issuance of $49.7 million, net
of issuance expense, of common stock of the Company. (See Note 16 of the Notes
to Consolidated Financial Statements.)
INDENTURE RESTRICTIONS. North Shore Gas' indenture relating to its first
mortgage bonds contains provisions and covenants restricting the payment of cash
dividends and the purchase or redemption of capital stock. At September 30,
1994, such restrictions amounted to $11.6 million out of North Shore Gas' total
retained earnings of $58.9 million. (See Note 6 of the Notes to Consolidated
Financial Statements.)
DISTRICT ENERGY. On December 16, 1992, Peoples District Energy Corporation
(Peoples District Energy) became a 50 percent participant in a partnership,
Trigen-Peoples District Energy Company, formed to provide heating and cooling
services to the McCormick Place exposition and convention center in Chicago,
Illinois and other large buildings near McCormick Place. The services will be
supplied from a central plant, a concept known as district energy. The other
partner is a subsidiary of Trigen Energy Corporation (Trigen), a company whose
primary business is constructing and operating district energy facilities.
Neither the partnership nor its partners are regulated as a public utility. (See
Note 5 of the Notes to Consolidated Financial Statements.)
INTEREST COVERAGE. Coverage ratios for Peoples Gas' fixed charges for fiscal
1994, 1993, and 1992 were 3.28, 3.57, and 3.18, respectively. The current fiscal
year ratio reflects the recording of Peoples Gas' fiscal 1994 portion of an IRS
settlement in income. (See Note 9 of the Notes to Consolidated Financial
Statements.) The 1993 ratio includes the effect of the rate increase granted in
October 1992 as well as decreased fixed charges, partially offset by increased
operating expenses.
-19-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION (Continued)
The corresponding coverage ratios for North Shore Gas for the same three
years were 3.33, 2.91, and 4.20, respectively. The current fiscal year ratio
reflects the recording of North Shore Gas' fiscal 1994 portion of an IRS
settlement in income. (See Note 9 of the Notes to Consolidated Financial
Statements.) The 1993 ratio includes the effect of the rate increase granted in
November 1991 and colder weather, offset by higher operating costs and interest
expense. The fiscal 1992 ratio includes a net gain of $3.8 million from the sale
of a land parcel as well as the November 1991 rate increase.
DEBT RATINGS. The long-term debt of both utility subsidiaries is rated Aa3 by
Moody's Investors Service and AA- by Standard and Poor's Corporation. There has
been no change in these ratings since fiscal 1985. The commercial paper of both
utilities has the top rating from the major rating agencies. On
October 24, 1994, Standard and Poor's Corporation affirmed its ratings of both
utilities' long-term debt and commercial paper but changed its ratings outlook
for both utilities to "negative" from "stable."
ENVIRONMENTAL MATTERS. The Company's utility subsidiaries are conducting
environmental investigations and work at certain sites that were the location of
former manufactured gas operations. (See Note 3A of the Notes to Consolidated
Financial Statements.)
In February 1994, North Shore Gas received a demand from a responsible
party under the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended (CERCLA) for reimbursement, indemnification and
contribution for response costs incurred at a site in Denver, Colorado. (See
Note 3B of the Notes to Consolidated Financial Statements.)
REGULATORY ACTIONS. On October 6, 1992, the Commission issued an order
approving changes in rates of Peoples Gas that were designed to increase annual
revenues by approximately $30.6 million, exclusive of additional charges for
revenue taxes. (See Note 2A of the Notes to Consolidated Financial Statements.)
In addition, the order approved a rate mechanism by which Peoples Gas will
recover costs associated with environmental activities, relating to past
manufactured gas operations. (See Note 3A of the Notes to Consolidated Financial
Statements.)
On September 30, 1992, the Commission issued an order in its consolidated
proceedings, initiated in March 1991, regarding the appropriate ratemaking
treatment of environmental costs relating to past manufactured gas operations
incurred by Illinois utilities, including Peoples Gas and North Shore Gas. In
its order, the Commission approved rate recovery of such environmental costs but
required that the recovery occur over a five-year period without recovery of
carrying charges on unrecovered balances. The Commission's order is on appeal
before the Illinois Supreme Court. (See Note 2A of the Notes to Consolidated
Financial Statements.)
Peoples Gas and North Shore Gas filed proposed changes in rates with the
Commission in December 1994. (See Item 1. Business - State Legislation and
Regulation of this report.)
-20-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION (Continued)
CAPITAL RESOURCES
CAPITAL SPENDING. Capital expenditures for additions, replacements, and
improvements to the utility plant were $87.2 million in 1994, $131.7 million in
1993, and $118.1 million in 1992.
The decline in fiscal 1994 expenditures from 1993 was partly the result of
completing certain major projects that were undertaken to enhance gas supply.
The current year amount reflects a level consistent with the financial goals of
the Company and maintains system safety. Expenditures in 1994 included $9.0
million for the third year of the four-year program to enhance the peak-day
withdrawal capability at the Manlove Field underground storage site.
Expenditures for that project in fiscal 1993 and 1992 amounted to $10.7 million
and $4.0 million, respectively.
Additional expenditures in fiscal 1993 included $7.7 million for a
liquefied natural gas vaporizer replacement project at Manlove Field and $9.0
million to complete the second pipeline supply connection for North Shore Gas.
Expenditures in 1992 for the latter project amounted to $14.9 million. Fiscal
1992 expenditures also included $5.0 million for the purchase and installation
of high-tech meter-reading devices.
Capital expenditures for fiscal 1995 are expected to be about $94.4
million, an increase of $7.2 million from the 1994 level. Estimated expenditures
in 1995 include the continuation of the cast iron main replacement program,
$10.4 million for computer and office equipment, and $1.3 million to complete
the underground storage site enhancement.
Fiscal 1995 sinking fund requirements for long-term debt are $4.0 million
for North Shore Gas. (See Note 14C of the Notes to Consolidated Financial
Statements.)
The Company anticipates that the subsidiaries' future cash needs for
capital expenditures and sinking fund requirements and maturities will be met
through internally generated funds, intercompany loans from the Company,
borrowing arrangements with banks and/or the issuance of commercial paper on an
interim basis, and periodic long-term financing involving equity or the
subsidiaries' first mortgage bonds.
BONDS ISSUED. On March 30, 1993, North Shore Gas filed a shelf registration
with the Securities and Exchange Commission (SEC) for the issuance of $40
million aggregate principal amount of first mortgage bonds. On May 13, 1993,
North Shore Gas issued a portion of those first mortgage bonds in an aggregate
principal amount of $15 million at 6.37 percent, due May 1, 2003. (See Note 14A
of the Notes to Consolidated Financial Statements.)
On December 22, 1993, the City of Chicago issued $102 million, in aggregate
principal amount, of gas supply revenue bonds, which were collateralized by an
equal amount of Peoples Gas' 30-year first mortgage bonds. The proceeds were
lent to Peoples Gas for the purpose of financing the construction of certain
facilities within the City. (See Note 14A of the Notes to Consolidated Financial
Statements.)
Additional bonds are issuable by the subsidiaries, upon approval by the
Commission, subject to limitations imposed by certain restrictive provisions of
the subsidiaries' open-end mortgages and supplements thereto. These restrictions
are not expected to have an impact on the subsidiaries' ability to issue
additional debt, as needed.
-21-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
----
Statement of Management's Responsibility 23
Report of Independent Public Accountants 24
Consolidated Statements of Income for fiscal years ended
September 30, 1994, 1993, and 1992 25
Consolidated Statements of Retained Earnings for fiscal
years ended September 30, 1994, 1993, and 1992 25
Consolidated Balance Sheets as of September 30, 1994 and 1993 26
Consolidated Capitalization Statements as of September 30, 1994
and 1993 27
Consolidated Statements of Cash Flows for fiscal years ended
September 30, 1994, 1993, and 1992 28
Notes to Consolidated Financial Statements 29
-22-
<PAGE>
STATEMENT OF MANAGEMENT'S RESPONSIBILITY
The financial statements and other financial information included in this
report were prepared by management, who is responsible for the integrity and
objectivity of presented data. The consolidated financial statements of the
Company and its subsidiaries were prepared in conformity with generally accepted
accounting principles and necessarily include some amounts that are based on the
best estimates and judgments of management.
The Company maintains internal accounting systems and related administrative
controls, along with internal audit programs, that are designed to provide
reasonable assurance that the accounting records are accurate and assets are
safeguarded from loss or unauthorized use. Consequently, management believes
that the accounting records and controls are adequate to produce reliable
financial statements.
Arthur Andersen LLP, the Company's independent public accountants approved by
the shareholders, as a part of their audit of the financial statements,
selectively reviews and tests certain aspects of internal accounting controls
solely to determine the nature, timing, and extent of their audit tests.
Management has made available to Arthur Andersen LLP all of the Company's
financial records and related data and believes that all representations made to
the independent public accountants during their audit were valid and
appropriate.
The Audit Committee of the Board of Directors, comprised of six outside
directors, meets periodically with management, the internal auditors, and Arthur
Andersen LLP, jointly and separately, to assure that appropriate
responsibilities are discharged. These meetings include discussion and review
of accounting principles and practices, internal accounting controls, audit
results, and the presentation of financial information in the annual report.
-23-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Shareholders of Peoples Energy Corporation:
We have audited the accompanying consolidated balance sheets and consolidated
capitalization statements of Peoples Energy Corporation (an Illinois
corporation) and subsidiary companies as of September 30, 1994 and 1993, and the
related consolidated statements of income, retained earnings, and cash flows for
each of the three years in the period ended September 30, 1994. These financial
statements and the schedules referred to below are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company and subsidiary
companies as of September 30, 1994 and 1993, and the results of their operations
and their cash flows for each of the three years in the period ended
September 30, 1994, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The financial statement schedules listed
in Item 14(a)2 are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic financial statements.
These financial statement schedules have been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly state, in all material respects, the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois
November 2, 1994
-24-
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Peoples Energy Corporation
- --------------------------------------------------------------------------------------------
For fiscal years ended September 30, 1994 1993 1992
- --------------------------------------------------------------------------------------------
(Thousands, except per-share amounts)
<S> <C> <C> <C>
Operating Revenues:
Gas sales $1,153,928 $1,127,138 $ 951,728
Transportation of customer-owned gas 110,128 117,949 132,745
Other 15,432 13,854 12,279
- --------------------------------------------------------------------------------------------
Total Operating Revenues 1,279,488 1,258,941 1,096,752
- --------------------------------------------------------------------------------------------
Operating Expenses:
Gas costs 669,039 646,351 531,845
Operation 220,765 213,090 191,363
Maintenance 37,947 35,692 36,826
Depreciation 64,684 60,807 57,347
Taxes - Income 32,053 37,566 33,571
- State and local revenue 132,734 131,673 118,265
- Other 20,450 20,719 20,257
- --------------------------------------------------------------------------------------------
Total Operating Expenses 1,177,672 1,145,898 989,474
- --------------------------------------------------------------------------------------------
Operating Income 101,816 113,043 107,278
- --------------------------------------------------------------------------------------------
Other Income:
Interest income 6,168 2,944 5,038
Miscellaneous (see Note 11) 14,628 3,402 5,906
- --------------------------------------------------------------------------------------------
Total Other Income 20,796 6,346 10,944
- --------------------------------------------------------------------------------------------
Gross Income 122,612 119,389 118,222
- --------------------------------------------------------------------------------------------
Income Deductions:
Interest on long-term debt of subsidiaries 44,234 41,514 41,461
Other interest 3,012 2,945 4,349
Amortization of debt discount and expense 810 727 732
Preferred stock dividends of subsidiaries -- 719 1,218
Miscellaneous 157 109 78
- --------------------------------------------------------------------------------------------
Total Income Deductions 48,213 46,014 47,838
- --------------------------------------------------------------------------------------------
Net Income $ 74,399 $ 73,375 $ 70,384
- --------------------------------------------------------------------------------------------
Average Shares of Common Stock Outstanding 34,854 34,809 34,151
Earnings Per Share of Common Stock $ 2.13 $ 2.11 $ 2.06
- --------------------------------------------------------------------------------------------
</TABLE>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<TABLE>
<CAPTION>
Peoples Energy Corporation
- --------------------------------------------------------------------------------------------
For fiscal years ended September 30, 1994 1993 1992
- --------------------------------------------------------------------------------------------
(Thousands)
<S> <C> <C> <C>
Balance at Beginning of Year $ 353,432 $ 342,267 $ 331,872
Add - Net Income 74,399 73,375 70,384
Deduct - Dividends on common stock of
$1.795, $1.775, and $1.75
per share, respectively 62,573 61,796 59,989
- Preferred stock redemption
premiums of a subsidiary -- 414 --
- --------------------------------------------------------------------------------------------
Balance at End of Year $ 365,258 $ 353,432 $ 342,267
- --------------------------------------------------------------------------------------------
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
-25-
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Peoples Energy Corporation
- --------------------------------------------------------------------------------------------
As of September 30, 1994 1993
- --------------------------------------------------------------------------------------------
(Thousands)
<S> <C> <C>
PROPERTIES AND OTHER ASSETS
- --------------------------------------------------------------------------------------------
Capital Investments:
Property, plant and equipment, at original cost $2,019,379 $1,950,981
Less - Accumulated depreciation 677,447 632,965
- --------------------------------------------------------------------------------------------
Net property, plant and equipment 1,341,932 1,318,016
Other investments 16,289 16,361
- --------------------------------------------------------------------------------------------
Total Capital Investments - Net 1,358,221 1,334,377
- --------------------------------------------------------------------------------------------
Current Assets:
Cash 3,667 8,511
Cash equivalents 73,584 16,240
Other temporary cash investments, at cost
that approximates market value 1,000 1,100
Trust fund, utility construction 31,493 4,243
Receivables -
Customers, net of allowance for uncollectible
accounts of $24,289 and $19,789, respectively 73,959 81,218
Other 2,224 30,698
Accrued unbilled revenues 19,922 30,038
Materials and supplies, at average cost 23,855 25,652
Gas in storage, at last-in, first-out cost 151,005 145,005
Gas costs recoverable through rate adjustments 14,426 51,526
Prepayments 2,050 2,441
- --------------------------------------------------------------------------------------------
Total Current Assets 397,185 396,672
- --------------------------------------------------------------------------------------------
Deferred Charges (see Note 17) 53,880 34,821
- --------------------------------------------------------------------------------------------
Total Properties and Other Assets $1,809,286 $1,765,870
- --------------------------------------------------------------------------------------------
CAPITALIZATION AND LIABILITIES
- --------------------------------------------------------------------------------------------
Capitalization (see Consolidated Capitalization Statements) $1,267,453 $1,156,526
- --------------------------------------------------------------------------------------------
Current Liabilities:
Interim loans of subsidiaries 900 68,600
Accounts payable 109,135 118,220
Dividends payable on common stock 15,690 15,496
Customer gas service and credit deposits 45,420 43,076
Sinking fund payments and maturities, due within one year -
Long-term debt of subsidiaries 4,000 4,000
Redeemable cumulative preferred stock of a subsidiary -- 3,400
Accrued taxes 28,936 27,914
Gas sales revenue refundable through rate adjustments 50,943 8,220
Accrued interest 12,942 10,371
- --------------------------------------------------------------------------------------------
Total Current Liabilities 267,966 299,297
- --------------------------------------------------------------------------------------------
Reserves and Deferred Credits:
Deferred income taxes - primarily accelerated depreciation 189,938 194,664
Investment tax credits being amortized over
the average lives of related property 39,887 41,676
Other 44,042 73,707
- --------------------------------------------------------------------------------------------
Total Reserves and Deferred Credits 273,867 310,047
- --------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $1,809,286 $1,765,870
- --------------------------------------------------------------------------------------------
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
-26-
<PAGE>
CONSOLIDATED CAPITALIZATION STATEMENTS
<TABLE>
<CAPTION>
Peoples Energy Corporation
- ----------------------------------------------------------------------------------------------------
As of September 30, 1994 1993
- ----------------------------------------------------------------------------------------------------
(Thousands, except number of shares)
<S> <C> <C>
Common Stockholders' Equity:
Common stock, without par value -
Authorized 60,000,000 shares
Outstanding 34,868,069 and 34,822,842 shares, respectively $ 276,120 $ 275,019
Retained earnings (see Consolidated Statements
of Retained Earnings) 365,258 353,432
- ----------------------------------------------------------------------------------------------------
Total Common Stockholders' Equity 641,378 628,451
- ----------------------------------------------------------------------------------------------------
Long-Term Debt:
Exclusive of sinking fund payments and maturities
due within one year
The Peoples Gas Light and Coke Company
First and Refunding Mortgage Bonds -
8% Series U, due June 1, 1999 43,375 43,375
8% Series V, due June 1, 1999 43,375 43,375
Adjustable-Rate Series W (3% and 3.30% through
September 30, 1994 and September 30, 1993, respectively),
due October 1, 1999 10,400 10,400
6.875% Series X, due March 1, 2015 50,000 50,000
7.50% Series Y, due March 1, 2015 50,000 50,000
7.50% Series Z, due March 1, 2015 50,000 50,000
10-1/4% Series AA, due March 1, 2015 50,000 50,000
8.10% Series BB, due May 1, 2020 75,000 75,000
6.37% Series CC, due May 1, 2003 75,000 75,000
5-3/4% Series DD, due December 1, 2023 75,000 --
Adjustable-Rate Series EE (2.55% through
November 30, 1994), due December 1, 2023 27,000 --
North Shore Gas Company
First Mortgage Bonds -
10.20% Series I, due October 27, 1997 12,000 16,000
8% Series J (converted to a fixed rate effective
November 1, 1993; previous adjustable rate was 8.125%
through October 31, 1993), due November 1, 2020 24,925 24,925
6-3/8% Series K, due October 1, 2022 25,000 25,000
6.37% Series L, due May 1, 2003 15,000 15,000
- ----------------------------------------------------------------------------------------------------
Total Long-Term Debt 626,075 528,075
- ----------------------------------------------------------------------------------------------------
Total Capitalization $1,267,453 $1,156,526
- ----------------------------------------------------------------------------------------------------
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
-27-
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Peoples Energy Corporation
- -------------------------------------------------------------------------------------------------
For fiscal years ended September 30, 1994 1993 1992
- -------------------------------------------------------------------------------------------------
(Thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 74,399 $ 73,375 $ 70,384
Adjustments to reconcile net income to net cash:
Depreciation 64,684 60,807 57,347
Deferred income taxes and investment tax
credits - net (14,599) 8,337 17,707
Change in other deferred credits and reserves (21,581) 27,996 18,857
Change in deferred charges (19,059) (1,625) (12,952)
Other 41 64 224
- -------------------------------------------------------------------------------------------------
83,885 168,954 151,567
Change in current assets and liabilities:
Receivables - net 35,733 (51,568) 148
Accrued unbilled revenues 10,116 (6,493) 1,577
Materials and supplies 1,797 1,474 (2,915)
Gas in storage (6,000) (2,967) (8,282)
Rate adjustments recoverable or refundable 79,823 (24,069) (49,284)
Accounts payable (9,085) 27,227 14,327
Customer gas service and credit deposits 2,344 (5,385) (3,971)
Accrued taxes 1,022 11,772 1,482
Accrued interest 2,571 459 (551)
Other 390 (266) (128)
- -------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 202,596 119,138 103,970
- -------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Capital expenditures of subsidiaries - construction (87,218) (131,669) (118,084)
Other assets (1,382) (3,516) (1,677)
Other temporary cash investments 100 (300) 200
Other long-term cash investments (601) (278) 708
Other capital investments 633 (1,578) 1,050
- -------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (88,468) (137,341) (117,803)
- -------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Retirement of long-term debt of subsidiaries (4,000) (74,811) (34,118)
Redemption of preferred stock of subsidiaries (3,400) (11,814) (3,900)
Interim loans of subsidiaries - net (67,700) 39,700 25,000
Issuance of long-term debt of subsidiaries 102,000 115,000 --
Trust fund, utility construction (27,250) (4,243) --
Dividends paid on common stock (62,378) (61,601) (58,776)
Issuance of common stock - net 1,100 1,016 50,677
- -------------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Financing Activities (61,628) 3,247 (21,117)
- -------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 52,500 (14,956) (34,950)
Cash and Cash Equivalents at Beginning of Year 24,751 39,707 74,657
- -------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 77,251 $ 24,751 $ 39,707
- -------------------------------------------------------------------------------------------------
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
-28-
<PAGE>
PEOPLES ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1A Principles of Consolidation
All subsidiaries are included in the consolidated financial statements. All
significant intercompany transactions have been eliminated in consolidation.
Certain items previously reported for years prior to 1994 have been reclassified
to conform with the current-year presentation.
1B Concentration of Credit Risk
Peoples Gas provides natural gas service to approximately 842,000 customers
within the City of Chicago. North Shore Gas provides natural gas service to
about 129,000 customers within approximately 275 square miles in Northeastern
Illinois. Credit risk for each utility is spread over a diversified base of
residential, commercial, and industrial retail sales and transportation
customers.
Peoples Gas and North Shore Gas encourage customers to participate in their
long-standing budget payment programs, which allow the cost of higher gas
consumption levels, associated with the heating season, to be spread over a 12-
month billing cycle. Customers' payment records are continually monitored and
credit deposits are required, where indicated, to minimize uncollectible write-
offs.
1C Revenue Recognition
Gas sales revenues for retail customers are recorded on the accrual basis
for all gas delivered during the month, including an estimate for gas delivered
but unbilled at the end of each month.
1D Property, Plant and Equipment
Property, plant and equipment is stated at original cost and includes
appropriate amounts of payroll taxes, employee benefit costs, administrative
costs, and an allowance for funds used during construction.
1E Maintenance and Depreciation
The Company's utility subsidiaries charge the cost of maintenance and
repairs of property and minor renewals and improvements of property to
maintenance expense. When depreciable property is retired, its original cost is
charged to the accumulated provision for depreciation.
The provision for depreciation substantially reflects the systematic
amortization of the original cost of depreciable property over estimated useful
lives on the straight-line method. Additionally, actual dismantling cost, net of
salvage, is included in the provision for depreciation in the month incurred.
The amounts provided are designed to cover not only losses due to wear and tear
that are not restored by maintenance, but also losses due to obsolescence and
inadequacy.
-29-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The provision for depreciation, expressed as an annual percentage of
original cost of depreciable property, is as follows:
<TABLE>
<CAPTION>
For fiscal years ended September 30, 1994 1993 1992
------------------------------------ ---- ---- ----
<S> <C> <C> <C>
Peoples Gas 3.6% 3.6% 3.6%
North Shore Gas 3.2 3.1 3.2
Consolidated 3.6 3.6 3.6
</TABLE>
1F Statement of Cash Flows
For purposes of the balance sheet and the statement of cash flows, the
Company considers all short-term liquid investments with maturities of three
months or less to be cash equivalents.
Income taxes and interest paid (excluding capitalized interest) were as
follows:
<TABLE>
<CAPTION>
For fiscal years ended September 30, 1994 1993 1992
------------------------------------ ---- ---- ----
(Thousands)
<S> <C> <C> <C>
Income taxes paid $50,160 $25,343 $19,655
Interest paid 44,970 43,730 44,736
</TABLE>
1G Income Taxes
The recording of deferred income taxes results from the use of accelerated
depreciation methods and certain other timing differences in recognition of
income and expense for tax and financial statement purposes.
Investment tax credits have been deferred and are being amortized through
credits to income over the book lives of related property.
In March 1993, the Company adopted, effective October 1, 1992, the
liability method of accounting for deferred income taxes required by SFAS No.
109, "Accounting for Income Taxes." Under the liability method, deferred income
taxes have been recorded using currently enacted tax rates for the differences
between the tax basis of assets and liabilities and the basis reported in the
financial statements. Due to the effects of regulation on Peoples Gas and North
Shore Gas, certain adjustments made to deferred income taxes to reflect the
adoption of SFAS No. 109 are, in turn, debited or credited to regulatory assets
or liabilities. Such adjustments had no material impact on financial position or
results of operations of the Company. (See Note 9.)
The preceding deferred-tax and tax-credit accounting conforms with
regulations of the Commission.
-30-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1H Recovery of Gas Costs, Including Charges for Transition Costs
Under the tariffs of Peoples Gas and North Shore Gas, the difference for
any fiscal year between costs recoverable through the Gas Charge and revenues
billed to customers under the Gas Charge is refunded or recovered over a 12-
month billing cycle beginning the following January 1. Consistent with these
tariff provisions, such difference for any month is recorded either as a current
liability or as a current asset (with a contra entry to Gas Costs), and the
fiscal year-end balance is amortized over the 12-month period beginning the
following January 1.
The Commission conducts annual proceedings regarding, for each gas utility,
the reconciliation of revenues from the Gas Charge and related costs incurred
for gas. In such proceedings, costs recovered by a utility through the Gas
Charge are subject to challenge. Such proceedings regarding Peoples Gas for
fiscal years 1992 through 1994 and North Shore Gas for fiscal years 1991 through
1994 are currently pending before the Commission.
Pursuant to FERC Order No. 636 and successor orders, pipelines are allowed
to recover from their customers so-called transition costs. These costs arise
from the restructuring of pipeline service obligations required by the 636
Orders. The utilities are currently recovering pipeline charges for transition
costs through an existing provision of the Gas Charge. The Commission entered an
order on March 9, 1994, providing for the full recovery of all such charges from
customers. In September 1994, the Commission entered orders on rehearing that
retained the provision for full recovery from customers. (See Notes 2A and 2B.)
1I Gas in Storage
Storage injections are priced at the fiscal-year average of costs of
natural gas purchased and synthetic natural gas (SNG) produced. Peoples Gas' SNG
production costs include costs of feedstock plus plant operation and maintenance
costs. Withdrawals from storage are priced on the last-in, first-out (LIFO) cost
method. The estimated current replacement cost of gas in inventory, at September
30, 1994 and 1993, exceeded the LIFO cost by approximately $210 million and $258
million, respectively.
-31-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. RATES AND REGULATION
2A Utility Rate Proceedings
PEOPLES GAS' RATE ORDER. On October 6, 1992, the Commission issued an order
approving changes in the rates of Peoples Gas that were designed to increase
annual revenues by approximately $30.6 million, exclusive of additional charges
for revenue taxes. The new rates were implemented on October 10, 1992. Peoples
Gas was allowed a 10.40 percent return on its original-cost rate base,
reflecting a 12.25 percent cost of common equity. The Commission's order also
approved a rate mechanism by which Peoples Gas will recover costs associated
with environmental activities, relating to past manufactured gas operations (see
discussion below). Peoples Gas and several parties appealed the Commission's
order to the Illinois Appellate Court. In August 1994, the Illinois Appellate
Court dismissed the appeal. That dismissal is now final and non-appealable.
ENVIRONMENTAL COST RECOVERY. On September 30, 1992, the Commission issued an
order in its consolidated proceedings, initiated in March 1991, regarding the
appropriate ratemaking treatment of environmental costs relating to past
manufactured gas operations incurred by Illinois utilities, including Peoples
Gas and North Shore Gas, in connection with the investigation and treatment of
residues associated with past manufactured gas operations ("environmental
costs"). In its order, the Commission approved rate recovery of such
environmental costs but required that the recovery occur over a five-year period
without recovery of carrying charges on unrecovered balances. Reimbursements of
environmental costs from insurance carriers or other entities are to be netted
against costs and reflected in rates over a five-year period. In November 1992,
several parties, including Peoples Gas and North Shore Gas, appealed the
Commission's order to the Illinois Appellate Court. On December 29, 1993, the
Third District Appellate Court issued its opinion affirming the Commission's
order in the consolidated proceedings. On April 6, 1994, the Illinois Supreme
Court allowed an appeal of the Appellate Court's decision. Any change made
pursuant to the Supreme Court's order on appeal would have a prospective effect
only.
FERC ORDER NO. 636 COST RECOVERY. On September 15, 1993, the Commission entered
an order initiating an investigation into the appropriate means of recovery by
Illinois gas utilities of pipeline charges for FERC Order No. 636 transition
costs. The Commission issued a final order in this proceeding on March 9, 1994.
The order provides for the full recovery of transition costs from Peoples Gas'
and North Shore Gas' gas service customers and transportation customers to the
extent they contract for firm standby service. The Citizens Utility Board and
State's Attorney of Cook County filed an application for rehearing of the March
9 order with the Commission. On May 4, 1994, the Commission granted rehearing,
limited to the question of the allocation of transition costs. In September
1994, the Commission entered orders on rehearing. In its orders on rehearing,
the Commission continued to provide for full recovery of transition costs, but
directed that, effective November 1, 1994, gas supply realignment (GSR) costs
(one of the four categories of transition costs) be recovered on a uniform
volumetric basis from all transportation and sales customers. (See Notes 1H and
2B.)
-32-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2B FERC Orders 636, 636-A, and 636-B
In 1992, the FERC issued Order Nos. 636, 636-A, and 636-B. There are
numerous appeals of the 636 Orders pending before the Federal Circuit Court of
Appeal for the D.C. Circuit.
The 636 Orders require substantial restructuring of the service obligations
of interstate pipelines. Among other things, the 636 Orders mandated
"unbundling" of existing pipeline gas sales services. Mandatory unbundling
requires pipelines to sell separately the various components of their gas sales
services (gathering, transportation and storage services, and gas supply). These
components were previously combined or "bundled" in gas services such as those
purchased by Peoples Gas and North Shore Gas. To address concerns raised by
utilities about reliability of service to their service territories, the 636
Orders required pipelines to offer a "no-notice" transportation service under
which firm transporters can receive delivery of gas up to their contractual
capacity level on any day without prior scheduling. Further, the 636 Orders
provided for mechanisms for pipelines to recover prudently incurred transition
costs associated with the restructuring process.
The FERC initiated individual restructuring proceedings for each interstate
pipeline. Each pipeline submitted a proposal to bring it into compliance with
the requirements of the 636 Orders. The restructured tariffs of Natural Gas
Pipeline Company of America (Natural), the principal pipeline serving Peoples
Gas and North Shore Gas, went into effect December 1, 1993. The restructured
tariffs of other pipelines serving Peoples Gas had previously gone into effect.
Several appeals of the orders approving Natural's and other pipelines'
restructured tariffs are pending before the Federal Circuit Court of Appeal for
the D.C. Circuit.
As part of the restructuring process, Peoples Gas and North Shore Gas
elected necessary levels of restructured services, including no-notice services,
from the menu of restructured services offered by the various pipelines. Also
during 1993, the utilities took the steps necessary to obtain reliable gas
supply as a replacement for the bundled merchant service supply which was no
longer available from the interstate pipelines to any significant extent.
Under the 636 Orders, pipelines must make separate rate filings to recover
transition costs. There are four categories of such costs, the largest of which
for Peoples Gas and North Shore Gas is GSR costs. The utilities are subject to
charges for transition cost recovery by Natural. Charges for transition costs
commenced on January 1, 1994. Appropriate accruals for transition costs have
been recorded. Peoples Gas and North Shore Gas are currently recovering
transition costs through the Gas Charge. On September 29, 1994, the FERC
approved a Stipulation and Agreement (Agreement) filed by Natural. The Agreement
places a cap on the amount of GSR costs recoverable by Natural from Peoples Gas
and North Shore Gas. For Peoples Gas, that cap would be approximately $103
million and for North Shore Gas, that cap would be approximately $25 million.
The 636 Orders are not expected to have a material adverse effect on
financial position or results of operations of the Company or its subsidiaries.
(See Notes 1H and 2A.)
-33-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. ENVIRONMENTAL MATTERS
3A Former Manufactured Gas Plant Operations
The Company's utility subsidiaries, their predecessors, and certain former
affiliates operated facilities in the past for manufacturing gas and storing
manufactured gas. In connection with manufacturing and storing gas, various by-
products and waste materials were produced, some of which might have been
disposed of rather than sold. Under certain laws and regulations relating to the
protection of the environment, the subsidiaries might be required to undertake
remedial action with respect to some of these materials, if found at the sites.
Two sites in Waukegan, Illinois, are the subjects of investigations (discussed
below) initiated by the United States Environmental Protection Agency (EPA).
In May 1990, North Shore Gas was notified by the EPA that the EPA had
documented the release or threatened release of hazardous substances,
pollutants, and contaminants at a site located in Waukegan, Illinois, where
manufactured gas and coking operations were formerly conducted (Waukegan I
Site). Also, North Shore Gas, General Motors Corporation (GMC), and Outboard
Marine Corporation were notified that each may be a potentially responsible
party (PRP) under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (CERCLA) with respect to the Waukegan I Site.
A PRP is potentially liable for the cost of any investigative and/or remedial
work that the EPA determines is necessary.
In September 1990, North Shore Gas entered into an Administrative Order on
Consent (AOC) with the EPA and the Illinois Environmental Protection Agency
(IEPA) to implement and conduct a remedial investigation/feasibility study
(RI/FS) of the Waukegan I Site. The RI/FS is comprised of an investigation to
determine the nature and extent of contamination at the site and a feasibility
study to develop and evaluate possible remedial actions. Other parties
identified as PRPs did not enter into the AOC. Under the terms of the AOC, North
Shore Gas is responsible for the cost of the RI/FS. North Shore Gas believes,
however, that it will recover a significant portion of the costs of the RI/FS
from other entities. GMC has agreed to share equally with North Shore Gas in
funding of the RI/FS cost, without prejudice to GMC's or North Shore Gas' right
to seek a lesser cost responsibility at a later date.
In September 1991, North Shore Gas, the Elgin, Joliet and Eastern Railway
(EJ&E), and the North Shore Sanitary District (NSSD) each received an
administrative order (AO) issued by the EPA. The AO directed all three entities
to remove and dispose of all visible free tar in a pit located within a separate
site in Waukegan, Illinois (Waukegan II Site) and to conduct a study to
determine the extent of contamination of the tar from the pit to the surrounding
property. All of the work under the AO has been completed. North Shore Gas has
entered into a settlement agreement with NSSD with respect to costs incurred
under the AO and intends to recover an appropriate amount of the remaining costs
from EJ&E.
The current owner of a site in McCook, Illinois, near Chicago, has advised
Peoples Gas that the owner has found what appear to be wastes associated with
by-products of the gas manufacturing process under its property. The owner has
asserted that these wastes are the responsibility of Peoples Gas. Peoples Gas is
currently evaluating this claim.
-34-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Peoples Gas and North Shore Gas, in cooperation with the IEPA, are
conducting investigations of other sites (a total of 32) to determine whether
remedial action might be necessary. The investigations were initiated pursuant
to an informal request by the IEPA. To the best of the Company's knowledge,
similar informal requests have been made by the IEPA to other major Illinois gas
and electric utilities. Peoples Gas and North Shore Gas have engaged
environmental consulting firms to assist in the utilities' investigations. At
this time, except for the Waukegan I Site and the 110th Street Station site
(discussed below), it is not known what, if any, remedial action will be
necessary at the sites or, if necessary, what the cost of any such action would
be. As discussed below, Peoples Gas may conduct an RI/FS at the Pitney Court
Station and Division Street sites under the supervision of the IEPA. In
addition, Peoples Gas is conducting investigations under the supervision of the
IEPA at the 110th Street Station and Equitable Distribution Station sites.
In August 1988, the IEPA conducted an inspection at Peoples Gas' Division
Street property in Chicago. During the inspection, the IEPA and Peoples Gas took
several soil samples for laboratory analysis. The analysis of the samples
collected by Peoples Gas indicates the presence of certain substances within the
soil of the Division Street property that could be attributable to former
manufactured gas operations. Peoples Gas may conduct an RI/FS of the property
under the supervision of the IEPA.
The current owners of a site in Chicago, formerly called Pitney Court
Station, have advised Peoples Gas that they found what appear to be gas
manufacturing wastes underneath their property. The owners have demanded
monetary compensation from Peoples Gas because of the presence of such wastes.
Peoples Gas has rejected this demand, but may conduct an RI/FS of the site under
the supervision of the IEPA.
Peoples Gas has observed what appear to be gas purification wastes on a
site in Chicago, formerly called the 110th Street Station, and property
contiguous thereto. Peoples Gas has fenced the site and the contiguous property
and is conducting a study under the supervision of the IEPA to determine the
feasibility of a limited removal action.
The current owners at a site in Chicago, formerly called South Station,
have advised Peoples Gas that they have found what appear to be gas
manufacturing wastes underneath their property. The owners have demanded
monetary compensation from Peoples Gas because of the presence of such wastes.
Peoples Gas is currently evaluating this claim.
Peoples Gas recently became aware of a planned residential development at a
site in Chicago, formerly called the Equitable Distribution Station. The current
owners of the site and Peoples Gas have agreed that Peoples Gas should conduct a
preliminary investigation to determine whether gas manufacturing wastes are
present at the site.
The utility subsidiaries are accruing and deferring the costs they incur in
connection with all of the sites, including related legal expenses, pending
recovery through rates or from insurance carriers or other entities. As of
September 30, 1994, the total of the costs deferred by the subsidiaries, net of
recoveries and amounts billed to other entities, was $17.5 million. This amount
includes an estimate of the costs of
-35-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
completing the studies required by the EPA at the Waukegan I Site and the
Waukegan II Site and the investigations initiated at the request of the IEPA at
the other sites referred to above. The amount also includes an estimate of the
costs of remediation at the Waukegan I Site and at the 110th Street Station site
in Chicago, at the minimum amount of the current estimated range of such costs.
The costs of remediation at the other sites cannot be determined until more is
known about the nature and extent of contamination and the remedial action, if
any, to be required by the EPA or the IEPA. While each subsidiary intends to
seek contribution from other entities for the costs incurred at the sites, the
full extent of such contributions cannot be determined at this time.
Peoples Gas and North Shore Gas have filed suit against a number of
insurance carriers for the recovery of environmental costs relating to the
utilities' former manufactured gas operations. The suit asks the court to
declare that the insurers are liable under policies in effect between 1938 and
1985 for costs incurred or to be incurred by the utilities in connection with
five former manufactured gas sites in Chicago and Waukegan. The utilities are
also asking the court to award damages stemming from the insurers' breach of
their contractual obligation to defend and indemnify the utilities against these
costs. At this time, management cannot determine the timing and extent of the
subsidiaries' recovery of costs from their insurance carriers. Accordingly, the
costs deferred as of September 30, 1994 have not been reduced to reflect
recoveries from insurance carriers.
Costs incurred by Peoples Gas or North Shore Gas for environmental
activities relating to former manufactured gas operations will be recovered from
insurance carriers or other entities or through rates for utility service.
Accordingly, management believes that the costs incurred by the subsidiaries in
connection with the sites will not have a material adverse effect on financial
position or results of operations of the subsidiaries. Peoples Gas and North
Shore Gas are authorized to recover the costs of environmental activities
relating to the utilities' former manufactured gas operations under rate
mechanisms approved by the Commission. As of September 30, 1994, the
subsidiaries had recovered $3.8 million of such costs through rates. (See Note
2A for a discussion of proceedings regarding the recovery of such costs through
utility rates.)
3B Former Mineral Processing Site in Denver, Colorado
In February 1994, North Shore Gas received a demand from the S.W. Shattuck
Chemical Company, Inc. (Shattuck), a responsible party under CERCLA, for
reimbursement, indemnification and contribution for response costs incurred at a
former mineral processing site in Denver, Colorado. The demand alleges that
North Shore Gas is a successor-in-interest to certain companies that were
allegedly responsible during the period 1934-1941 for the disposal of mineral
processing wastes containing radium and other hazardous substances at the site.
North Shore Gas is examining this claim. The cost of the remedy at the site has
been estimated by Shattuck to be approximately $31 million.
-36-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
No legal proceedings have been commenced against North Shore Gas. In the
event of litigation, North Shore Gas would vigorously defend itself. North Shore
Gas has strong defenses against any claim that it was responsible for the
disposal of hazardous substances at the site or that it had control over, or
succeeded to the liability of, any entity that disposed of hazardous substances
at the site. Accordingly, North Shore Gas does not believe that it has liability
for the response costs, but cannot determine the matter with certainty. At this
time, North Shore Gas cannot reasonably estimate what range of loss, if any, may
occur. In the event that North Shore Gas incurred liability, it would pursue
reimbursement from insurance carriers, other responsible parties, if any, and
through its rates for utility service.
4. GAS OVER-PRESSURE CONDITION
On January 17, 1992, an over-pressure condition occurred in the gas mains
of Peoples Gas serving an approximately one-square-mile area of the Near
Northwest Side of the City of Chicago. The over-pressure condition caused a
major explosion and numerous fires. Peoples Gas is aware of four deaths and 14
personal injuries allegedly resulting from the explosion and fires. Peoples Gas
also has been informed that damage occurred in an estimated 28 buildings. There
was also damage, such as broken windows, wall cracks, and water damage, to
additional buildings.
A number of lawsuits have been filed against Peoples Gas as a result of the
over-pressure condition. Some lawsuits also have named the Company as a
defendant. The Company is not a proper party to these suits, and management
expects that the Company will be dismissed from the litigation. The lawsuits
include wrongful-death claims and several class actions that seek to certify as
a class those persons who suffered bodily harm and/or property damage. All of
the suits allege negligence and seek compensatory damages. Some of the lawsuits
also seek punitive damages. These suits have not quantified the alleged damages
except for certain amounts that are not material.
In January 1993, the National Transportation Safety Board (NTSB) completed
its report regarding its investigation of the over-pressure incident that
occurred on January 17, 1992. In its report, the NTSB stated that "the probable
cause of the over-pressure accident and the resulting losses was the failure of
Peoples Gas Light Coke Company to adequately train its gas operations section
employees in recognizing and correctly responding to abnormal situations, which
consequently led to the failure of the gas operations section crew to properly
monitor and control the pressure of the gas being supplied to the low-pressure
gas system during a routine inspection."
In June 1993, the Staff of the Illinois Commerce Commission (Commission
Staff) released its report concerning the over-pressure incident. In its report,
the Commission Staff concluded that employee error was the probable cause of the
over-pressurization. The report was critical of Peoples Gas' training of its
personnel in its gas operations section and of some of Peoples Gas' practices at
the time of the incident.
-37-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company and Peoples Gas strongly disagree with the criticisms by the
NTSB and the Commission Staff of the training given by Peoples Gas to personnel
in its gas operations section. The Company and Peoples Gas also disagree with
some of the findings and conclusions of the Commission Staff, including several
of the Commission Staff's findings and its theory, analysis, and conclusions
pertaining to the probable cause of the over-pressurization.
The Company and Peoples Gas carry substantial insurance coverage. If
liability were found on the part of the Company or Peoples Gas, management
believes that any costs incurred for damages will be adequately covered by
insurance. However, Peoples Gas' primary insurance carrier has asserted that
under Illinois law, liability for punitive damages is not insurable. Peoples Gas
has advised the insurance carrier that it disagrees and intends to assert all of
its rights against the carrier including its right to obtain recovery for
punitive damages, if any. Management is not aware of any conduct on its part or
by employees of Peoples Gas or of the Company that would give rise to punitive
damages under Illinois law. Accordingly, management believes that the incident
will not have a material adverse effect on financial position or results of
operations of the Company or Peoples Gas.
5. DISTRICT ENERGY
On December 16, 1992, Peoples District Energy became a 50 percent
participant in a partnership, Trigen-Peoples District Energy Company, formed to
provide heating and cooling services to the McCormick Place exposition and
convention center in Chicago, Illinois and other large buildings near McCormick
Place. The services will be supplied from a central plant, a concept known as
district energy. The other partner is a subsidiary of Trigen. Neither the
partnership nor its partners are regulated as a public utility.
In December 1992, the partnership entered into a 28-year contract with the
Metropolitan Pier and Exposition Authority (MPEA) to construct and operate a
plant that will provide steam and chilled water to McCormick Place for heating
and cooling purposes. On November 1, 1993, the partnership assumed operation of
the current space-conditioning system and began providing service to the two
existing halls. The partnership also will provide heating and cooling to a
planned exhibition hall that is scheduled to be in operation early in 1997. The
partnership is obligated to provide services to McCormick Place for the term of
the contract at or below the cost (as determined by a contractual formula) that
the MPEA would incur to produce heating and cooling for itself. The contract
also obligates the partnership to complete and pay for construction of the plant
by certain dates specified in the contract. To secure its obligations during the
service period under the contract, the partnership is obligated to provide,
maintain, and reinstate a letter of credit upon which the MPEA can draw to pay
its costs, expenses, and damages, up to $4 million per incident, principally in
the event of the partnership's failure to cure timely an interruption of
service.
The district energy plant is estimated to cost approximately $36 million.
The MPEA has effectively funded $8 million of the construction costs, and the
partnership will fund the balance. The Company and Trigen have each posted an
$18 million irrevocable letter of credit in favor of the partnership to fund the
partnership's portion of construction costs. The partnership plans to seek debt
financing for a major portion of the project.
-38-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In addition to committing capital to the partnership, the Company and
Trigen have provided two joint and several guarantees to the MPEA of the
partnership's performance of its obligations under the contract. One of the
guarantees covers all obligations of the partnership relating to construction of
the project (Construction Obligations), and is limited in the aggregate to $15
million, except for the guarantors' funding obligations described above and
costs to the extent incurred by the MPEA in connection with enforcement of
obligations of the partnership or the guarantors. The second guarantee covers
all obligations of the partnership other than the Construction Obligations,
including liabilities arising from an interruption of service to McCormick
Place, insolvency of the partnership, or other partnership default. This second
guarantee is limited in the aggregate to $11 million, except for an additional
$4 million to $8 million in the event of insolvency of the partnership or the
installation (pursuant to enforcement of lender or MPEA remedies) of any other
operator of the district energy plant in lieu of the partnership, and except for
the partnership's obligations relating to the letter of credit in favor of the
MPEA described above and costs to the extent incurred by the MPEA in connection
with the enforcement of obligations of the partnership or the guarantors.
6. COVENANTS REGARDING RETAINED EARNINGS
North Shore Gas' indenture relating to its first mortgage bonds contains
provisions and covenants restricting the payment of cash dividends and the
purchase or redemption of capital stock. At September 30, 1994, such
restrictions amounted to $11.6 million out of North Shore Gas' total retained
earnings of $58.9 million.
7. LONG-TERM LEASE
In March 1985, Peoples Gas sold its headquarters office building and
entered into a lease with an initial 10-year term and two five-year renewal
options at the market rate in effect at each option date. Peoples Gas is
accounting for this as an operating lease in accordance with SFAS No. 13,
"Accounting for Leases." The rental obligation consists of a base rent of
approximately $4.3 million per year and additional annual escalations based on
operating costs, taxes, and increases in the Consumer Price Index. Rental
expense under this arrangement was $6.1 million for each of the fiscal years
1994 and 1993.
In October 1993, Peoples Gas entered into a new 15-year lease to relocate
its headquarters office on or before March 1, 1995. Rental expense will be
comparable with the present lease.
-39-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. EMPLOYEE BENEFITS
8A Pensions
The Company and its subsidiaries participate in two defined benefit pension
plans covering substantially all employees. These plans provide pension benefits
that generally are based on an employee's length of service, compensation during
the five years preceding retirement, and social security benefits. Peoples Gas
and North Shore Gas make annual contributions to the plans based upon actuarial
determinations and in consideration of tax regulations and funding requirements
under federal law.
The Company also has a non-qualified pension plan that provides certain
employees with pension benefits in excess of qualified plan limits imposed by
federal tax law.
Net pension cost for all plans for fiscal 1994, 1993, and 1992 included the
following components:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
1994 1993 1992
- --------------------------------------------------------------------------------------------
(Millions)
<S> <C> <C> <C>
Service cost--benefits earned during year $ 15.8 $ 17.1 $ 14.2
Interest cost on projected benefit obligations 30.0 30.4 31.9
Actual return on plan assets (gain) loss (15.0) (56.8) (52.6)
Net amortization and deferral (25.5) 17.0 12.1
- --------------------------------------------------------------------------------------------
Net pension cost $ 5.3 $ 7.7 $ 5.6
- --------------------------------------------------------------------------------------------
</TABLE>
The calculation of pension cost assumed a long-term rate of return on
assets of 7.5 percent for 1992 through 1994.
The following table shows the estimated funded status of the Company's
pension plans at September 30, 1994 and 1993:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
1994 1993
- ---------------------------------------------------------------------------------
(Millions)
<S> <C> <C>
Plan Assets at Market Value $531.1 $576.1
- ---------------------------------------------------------------------------------
Actuarial present value of plan benefits:
Vested 334.2 355.6
Non-vested 39.1 47.2
- ---------------------------------------------------------------------------------
Accumulated benefit obligation 373.3 402.8
Effect of projected future compensation increases 101.0 124.3
- ---------------------------------------------------------------------------------
Projected Benefit Obligation 474.3 527.1
- ---------------------------------------------------------------------------------
Excess of plan assets over projected benefit obligation 56.8 49.0
Less:
Unrecognized transition asset 29.9 32.7
Unrecognized prior service cost (5.5) (6.0)
Unrecognized net gain (loss) 35.4 34.9
- ---------------------------------------------------------------------------------
Accrued Pension (Liability) Asset $(3.0) $(12.6)
- ---------------------------------------------------------------------------------
</TABLE>
-40-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The projected benefit obligation was determined using a discount rate of
6.5 percent for 1994 and 5.75 percent for 1993, and assumed future compensation
increases of 5.0 percent for each year. Plan assets consist primarily of
marketable equity and fixed-income securities.
8B Postretirement Benefits Other Than Pensions
The Company and its subsidiaries also provide certain health care and life
insurance benefits for retired employees. Substantially all employees may become
eligible for such benefit coverage if they reach retirement age while working
for the companies. The plans are funded based upon actuarial determinations and
in consideration of tax regulations and funding requirements under federal law.
The Company adopted SFAS No. 106 effective October 1, 1993. SFAS No. 106
requires the accrual of the expected costs of such benefits during the
employees' years of service.
Net postretirement benefit cost for all plans for fiscal 1994 included the
following components:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
1994
- -----------------------------------------------------------------
(Millions)
<S> <C>
Service cost--benefits earned during year $ 3.1
Interest cost on projected benefit obligations 7.7
Actual return on plan assets (gain) loss (0.3)
Amortization of transition obligation 4.9
Net amortization and deferral (0.2)
- -----------------------------------------------------------------
Net postretirement benefit cost $15.2
- -----------------------------------------------------------------
</TABLE>
The calculation of postretirement benefit cost assumed a long-term rate of
return on assets of 7.5 percent.
The Company recognized total postretirement costs of $15.2 million during
fiscal 1994. Of this amount, $8.5 million was funded through trust funds for
future benefit payments. Such costs during fiscal year 1993 were $16.5 million,
of which $9.9 million was funded.
In October 1992, Peoples Gas was granted rates by the Commission that
included its estimated postretirement benefit costs determined on the accrual
basis of accounting. (See Note 2A.) The financial reporting for postretirement
benefit costs of Peoples Gas is consistent with the related rate treatment. Due
to regulatory treatment, the adoption of SFAS No. 106 did not have a material
effect on financial position or results of operations.
-41-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table sets forth the estimated funded status for the
postretirement health care and life insurance plans at September 30, 1994:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
1994
- ----------------------------------------------------------------------
(Millions)
<S> <C>
Plan Assets at Market Value $ 21.2
- ----------------------------------------------------------------------
Accumulated postretirement benefit obligation (APBO):
Retirees 61.0
Fully Eligible Active Plan Participants 17.1
Other Active Plan Participants 29.0
- ----------------------------------------------------------------------
Total APBO 107.1
- ----------------------------------------------------------------------
APBO in excess of plan assets (85.9)
Less:
Unrecognized transition obligation (93.7)
Unrecognized net gain 7.5
- ----------------------------------------------------------------------
Accrued Postretirement Benefit (Liability) Asset $ 0.3
- ----------------------------------------------------------------------
</TABLE>
The total APBO was determined using a discount rate of 7.75 percent and
assumed future compensation increases of 5.0 percent. The unfunded obligation
will be amortized over 20 years. Plan assets consist primarily of marketable
equity and fixed-income securities.
For measurement purposes, a health care cost trend rate of 10.25 percent
was assumed for fiscal 1995, and that rate thereafter will decline to 5.0
percent in 2003 and subsequent years. The health care cost trend rate assumption
has a significant effect on the amounts reported. Increasing the assumed health
care cost trend rate by one percentage point for each future year would have
increased the APBO at September 30, 1994, by $8.0 million and the aggregate of
service and interest cost components of the net periodic postretirement benefit
cost by $1.1 million annually.
8C Postemployment Benefits
In November 1992, the FASB issued SFAS No. 112. This statement requires the
accrual of certain benefits provided to former or inactive employees after
employment but before retirement. The Company adopted SFAS No. 112 effective
October 1, 1994. Implementation of this statement will not have a material
effect on financial position or results of operations.
-42-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. TAX MATTERS
<TABLE>
<CAPTION>
Provision for Income Taxes
- --------------------------------------------------------------------------------------------------
For fiscal years ended September 30, 1994 1993 1992
- --------------------------------------------------------------------------------------------------
(Thousands)
<S> <C> <C> <C>
Current:
Federal $38,438 $24,888 $15,232
State 8,419 4,792 3,119
- --------------------------------------------------------------------------------------------------
Total current income taxes 46,857 29,680 18,351
- --------------------------------------------------------------------------------------------------
Deferred:
Federal (8,582) 6,968 14,855
State (987) 2,478 4,179
- --------------------------------------------------------------------------------------------------
Total deferred income taxes (9,569) 9,446 19,034
- --------------------------------------------------------------------------------------------------
Investment tax credits - net:
Federal (2,017) (2,044) (1,801)
State 252 536 474
- --------------------------------------------------------------------------------------------------
Total investment tax credits - net (1,765) (1,508) (1,327)
- --------------------------------------------------------------------------------------------------
Total provision included in income taxes 35,523 37,618 36,058
Less - Included in other income or operation expense 3,470 52 2,487
- --------------------------------------------------------------------------------------------------
Total provision for income taxes $32,053 $37,566 $33,571
- --------------------------------------------------------------------------------------------------
</TABLE>
See Note 1G for discussion of the adoption of SFAS No. 109 effective
October 1, 1992. Set forth in the table below are the temporary differences
which gave rise to the net deferred income tax liabilities:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
As of September 30, 1994 1993
- --------------------------------------------------------------------------------------------
(Thousands)
<S> <C> <C>
Deferred tax liabilities:
Property - accelerated depreciation and
other property related items $223,865 $214,352
Gas costs reconciliation -- 18,303
Other 4,097 3,250
- --------------------------------------------------------------------------------------------
Total deferred income tax liabilities 227,962 235,905
- --------------------------------------------------------------------------------------------
Deferred tax assets:
Unamortized investment tax credits (15,820) (16,547)
Uncollectible accounts (9,635) (7,852)
Other (12,569) (16,842)
- --------------------------------------------------------------------------------------------
Total deferred income tax assets (38,024) (41,241)
- -------------------------------------------------------------------------------------------
Net deferred income tax liabilities $189,938 $194,664
- --------------------------------------------------------------------------------------------
</TABLE>
-43-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The sources of significant timing differences which gave rise to federal
deferred income taxes for the year prior to adoption of SFAS No. 109 was as
follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
For fiscal year ended September 30, 1992
- ------------------------------------------------------------------------------
(Thousands)
<S> <C>
Accelerated depreciation $ 5,331
Gas costs reconciliation 10,375
Other (851)
- ------------------------------------------------------------------------------
Total federal deferred income tax expense $14,855
- ------------------------------------------------------------------------------
</TABLE>
The following is a reconciliation between the computed federal income tax
expense (tax rate of 35 percent for 1994, 34.75 percent for 1993, and 34 percent
for 1992, times pre-tax book income) and the total provision for federal income
tax expenses:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
For fiscal years ended September 30, 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------
Percent Percent Percent
of of of
Amount Pre-tax Amount Pre-tax Amount Pre-tax
(000's) Income (000's) Income (000's) Income
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Computed federal income
tax expense $35,783 35.00 $36,107 34.75 $33,962 34.0
Amortization of investment
tax credits (2,017) (1.97) (2,044) (1.97) (1,801) (1.8)
Amortization of deferred taxes (1,951) (1.91) (2,027) (1.95) (2,074) (2.1)
Nontaxable-tax settlement principal (1,965) (1.92) 22 0.02 -- --
Other, net (2,011) (1.97) (2,246) (2.16) (1,801) (1.8)
- ---------------------------------------------------------------------------------------------------------------------------
Total provision for federal
income taxes $27,839 27.23 $29,812 28.69 $28,286 28.3
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
On September 30, 1993, the Company received notification from the IRS that
settlement of past income tax returns had been reached for fiscal years 1978
through 1990. The IRS settlement resulted in 1994 payments of principal and
interest to the Company in total amount of approximately $28 million, or $21.6
million after income taxes. Peoples Gas and North Shore Gas have each received
regulatory authorization to defer the recording of the settlement amount in
income for fiscal year 1993, and to record its portion of the settlement amount
in income for fiscal years 1994 and 1995. Each utility has represented to the
Commission that, having received this accounting authorization, it will not file
a request for an increase in base rates before December 1994. The regulatory
treatment of the IRS settlement having been resolved in November 1993, Peoples
Gas and North Shore Gas together included $14 million, or $10.8 million after
income taxes, in income in 1994. The amount after income taxes is included in
Other Income - Miscellaneous. At September 30, 1994, approximately $14 million
is included in Reserves and Deferred Credits - Other. Each utility will amortize
its remaining portion of the settlement amount in income in fiscal year 1995,
the effect of which will be to offset increases in costs that the utilities will
incur during that year.
-44-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. ASSETS SUBJECT TO LIEN
The Indenture of Mortgage, dated January 2, 1926, as supplemented, securing
the first and refunding mortgage bonds issued by Peoples Gas, constitutes a
direct, first-mortgage lien on substantially all property owned by Peoples Gas.
The Indenture of Mortgage, dated April 1, 1955, as supplemented, securing the
first mortgage bonds issued by North Shore Gas, constitutes a direct, first-
mortgage lien on substantially all property owned by North Shore Gas.
11. OTHER INCOME - MISCELLANEOUS
<TABLE>
<CAPTION>
For fiscal years ended September 30, 1994 1993 1992
- -------------------------------------------------------------------------------------------------------
(Thousands)
<S> <C> <C> <C>
Amortization of net gain on sale of Peoples Gas Building $ 1,151 $1,151 $ 1,151
Interest on amounts recoverable from customers 2,495 1,632 40
Amortization of gain on reacquired bonds 380 380 652
Income tax settlement (see Note 9) 14,164 -- --
Income taxes on income tax settlement (see Note 9) (3,372) -- --
Gain on sale of property -- -- 6,207
Income taxes on sale of property -- -- (2,404)
Other (190) 239 260
- -------------------------------------------------------------------------------------------------------
Total Other Income - Miscellaneous $14,628 $3,402 $ 5,906
- -------------------------------------------------------------------------------------------------------
</TABLE>
12. CAPITAL COMMITMENTS
Total contract and purchase order commitments of the Company and its
subsidiaries at September 30, 1994, amounted to approximately $6.6 million.
13. SHORT-TERM BORROWINGS AND CREDIT LINES
<TABLE>
<CAPTION>
As of September 30, 1994 1993
- -----------------------------------------------------------------------------
(Thousands)
<S> <C> <C>
Bank Loans
Peoples Gas
7.75% due December 22, 1994 $ 900 $ --
- -----------------------------------------------------------------------------
Commercial Paper
Peoples Gas
due October 1, 1993,
through October 21, 1993 -- 63,200
North Shore Gas
due October 1, 1993,
through October 21, 1993 -- 5,400
- -----------------------------------------------------------------------------
Available Lines of Credit at End of Year
Unused bank lines $140,150 $46,400
- -----------------------------------------------------------------------------
</TABLE>
-45-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Short-term cash needs of Peoples Gas and North Shore Gas are met through
intercompany loans from the Company, bank loans, and/or the issuance of
commercial paper. The outstanding total amount of bank loans and commercial
paper issuances cannot at any time exceed total bank credit then in effect.
The Company has a line of credit of $10 million that expires December 16,
1994, to cover projected short-term credit needs of the Company. On February 1,
1994, the utility subsidiaries reduced their lines of credit to approximately
$154 million from $184 million in effect since November 1, 1993. On
July 1, 1994, the utility subsidiaries again reduced their lines of credit to
approximately $131 million from $154 million. Agreements covering $93.7 million
of the total will expire on June 29, 1995. The agreement covering the remaining
$37.4 million will expire on January 31, 1997. Such lines of credit cover
projected short-term credit needs of the subsidiaries and support the long-term
debt treatment of Peoples Gas' adjustable-rate mortgage bonds. Payment for the
lines of credit is by fee.
14. LONG-TERM DEBT
14A Issuance of Bonds
On March 30, 1993, North Shore Gas filed a shelf registration with the SEC
for the issuance of $40 million aggregate principal amount of first mortgage
bonds. On May 13, 1993, North Shore Gas issued a portion of those first mortgage
bonds in an aggregate principal amount of $15 million at 6.37 percent due May 1,
2003. Proceeds of the offering were used to refund approximately $11 million
aggregate principal amount of North Shore Gas' previously issued first mortgage
bonds and for general corporate purposes. North Shore Gas may issue all or a
portion of the remaining bonds during fiscal 1995 and/or fiscal 1996. Proceeds
of the future offering will be used for general corporate purposes.
On December 22, 1993, the City of Chicago issued $102 million, in aggregate
principal amount, of gas supply revenue bonds ($75 million 5-3/4 percent Series
A and $27 million adjustable-rate Series B), which were collateralized by an
equal amount of Peoples Gas' 30-year first mortgage bonds. The proceeds were
lent to Peoples Gas for the purpose of financing the construction of certain
facilities within the City. The proceeds are being held in a trust fund until
drawn down by Peoples Gas for reimbursement of construction expenditures.
In accordance with provisions of the Internal Revenue Code and regulations
thereunder, any arbitrage income must be paid to the federal government.
Additionally, all assets financed through this arrangement must be depreciated
on a straight-line basis for tax purposes.
14B Interest-Rate Adjustments
The rate of interest on the City of Joliet 1984 Series C Bonds, which are
secured by Peoples Gas' Adjustable-Rate Bonds, Series W, is subject to
adjustment annually on October 1. Owners of the Series C Bonds have the right to
tender such bonds at par during a limited period prior to that date. Peoples Gas
is obligated to purchase any such bonds tendered if they cannot be remarketed.
All Series C Bonds that were tendered prior to October 1, 1994, have been
remarketed. The interest rate on such bonds is 4.2 percent for the period
October 1, 1994, through September 30, 1995.
-46-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The rate of interest on the City of Chicago 1993 Series B Bonds, which are
secured by Peoples Gas' Adjustable-Rate Bonds, Series EE, currently is subject
to adjustment annually on December 1. Owners of the Series B Bonds have the
right to tender such bonds at par during a limited period prior to that date.
Peoples Gas is obligated to purchase any such bonds tendered if they cannot be
remarketed. The interest rate on such bonds is 2.55 percent for the period
December 1, 1993, through November 30, 1994.
Effective November 1, 1993, the rate of interest on North Shore Gas'
Adjustable-Rate Bonds, Series J, was fixed at 8 percent until maturity,
November 1, 2020.
14C Sinking Fund Requirements of Subsidiaries
As of September 30, 1994, long-term debt sinking fund requirements of North
Shore Gas for fiscal years 1995 through 1998 equal $4 million each year.
14D Fair Value of Financial Instruments
The estimated fair value of the Company's $626.1 million carrying amount of
long-term debt approximated $662.7 million as of September 30, 1994. As of
September 30, 1993, the estimated fair value of the Company's $528.1 million
carrying amount of long-term debt approximated $560.4 million. The estimated
fair value of the Company's long-term debt is based on quoted market prices or
yields for issues with similar terms and remaining maturities. Since Peoples Gas
and North Shore Gas are subject to regulation, any gains or losses related to
the difference between the carrying amount and the fair value of financial
instruments would not be realized by the Company's shareholders. The carrying
amount of all other financial instruments approximates fair value.
15. PREFERRED STOCK
The Company has five million shares of Preferred Stock, no par value,
authorized for issuance, of which none was issued and outstanding at September
30, 1994.
-47-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
16. COMMON STOCK
<TABLE>
<CAPTION>
For fiscal years ended September 30, 1994 1993 1992
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares outstanding--beginning of year 34,822,842 34,773,944 32,761,763
Shares issued:
Employee Stock Purchase Plan 35,570 28,848 30,816
Long-Term Incentive Compensation Plan 13,345 81,425 126,656
Other Deferred Compensation Plans 1,278 1,206 3,921
Public Offering -- -- 1,950,000
Shares reacquired (4,966) (62,581) (99,212)
- ------------------------------------------------------------------------------------------
Shares outstanding-end of year 34,868,069 34,822,842 34,773,944
- ------------------------------------------------------------------------------------------
<CAPTION>
Shares Reserved As of September 30, 1994 1993 1992
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dividend Reinvestment and Stock
Purchase Plan 1,036,891 1,036,891 1,036,891
Employee Stock Purchase Plan 1,051,734 1,087,304 1,116,152
Long-Term Incentive Compensation Plan 469,280 482,625 564,050
- ------------------------------------------------------------------------------------------
Total shares reserved 2,557,905 2,606,820 2,717,093
- ------------------------------------------------------------------------------------------
<CAPTION>
Stock
Non-Qualified Appreciation
Long-Term Incentive Compensation Plan Price Range Stock Options Rights (SARs)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at September 30, 1992 $23.69-25.69 77,300 77,300
- ------------------------------------------------------------------------------------------
Granted $ 30.38 56,300 56,300
Exercised 23.69-25.69 (69,200) (69,200)
- ------------------------------------------------------------------------------------------
Outstanding at September 30, 1993 $25.69-30.38 64,400 64,400
- ------------------------------------------------------------------------------------------
Granted $ 30.88 52,700 52,700
Exercised 30.38 (1,200) (1,200)
- ------------------------------------------------------------------------------------------
Outstanding at September 30, 1994 $25.69-30.88 115,900 115,900
- ------------------------------------------------------------------------------------------
</TABLE>
Restricted stock awarded to officers of the Company during the last three
fiscal years are as follows: 1994, 12,625 shares; 1993, 12,225 shares; and 1992,
13,350 shares. As of September 30, 1994, there were 353,380 shares available for
future grant under options or restricted stock awards. As of September 30, 1994,
there were 420,450 SARs available for future grant.
-48-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
17. DEFERRED CHARGES
<TABLE>
<CAPTION>
As of September 30, 1994 1993
- --------------------------------------------------------------------------------------------
(Thousands)
<S> <C> <C>
Debt expense being amortized over the lives of outstanding issues $14,286 $13,389
Energy Conservation Plan expenses 1,054 1,071
Environmental costs, net of recoveries 17,505 13,973
Clearing accounts, primarily applicable to construction projects 936 523
Interest on gas sales revenue refundable 2,965 397
Recoverable gas over-pressure condition costs 2,193 3,426
Peoples District Energy 757 897
Transition gas costs from pipeline supplier 11,300 --
Other 2,884 1,145
- --------------------------------------------------------------------------------------------
Total Deferred Charges $53,880 $34,821
- --------------------------------------------------------------------------------------------
</TABLE>
18. QUARTERLY FINANCIAL DATA (UNAUDITED)
The fluctuation in quarterly results is primarily due to the seasonal
nature of the gas distribution business. Results for the first quarter of fiscal
1994 include the recording of one-half of an IRS settlement, in income,
increasing net income by $10.7 million or 31 cents per share.
<TABLE>
<CAPTION>
Earnings
Operating Operating Per
Fiscal Quarters Revenues Income Net Income Share
- -------------------------------------------------------------------------
(Thousands, except per-share amounts)
<S> <C> <C> <C> <C>
1994
Fourth $118,822 $(6,776) $(15,597) $(0.45)
Third 206,791 11,560 2,604 0.07
Second 574,593 58,434 48,404 1.39
First 379,282 38,598 38,988 1.12
1993
Fourth $136,057 $(3,805) $(13,218) $(0.38)
Third 224,303 14,598 4,891 0.14
Second 522,455 60,762 50,643 1.45
First 376,126 41,488 31,059 0.89
</TABLE>
Quarterly earnings-per-share amounts are based on the weighted average
common shares outstanding for each quarter and, therefore, might not equal the
amount computed for the total year.
-49-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
-50-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Information relating to the directors of the Company is set forth under the
caption "Information Concerning Nominees for Election as Directors" of the
Company's Proxy Statement, to be filed with the SEC on or about December 30,
1994, and to be distributed in connection with the Company's Annual Meeting of
Shareholders to be held on February 24, 1995. Such information is incorporated
herein by reference.
Information relating to the executive officers of the Company is set forth
in Part I of this report under the caption "Executive Officers of the Company."
ITEM 11. EXECUTIVE COMPENSATION
Information relating to executive compensation is set forth under the
captions "Executive Compensation" and "Report on Executive Compensation" of the
Company's Proxy Statement, to be filed with the SEC on or about December 30,
1994, and to be distributed in connection with the Company's Annual Meeting of
Shareholders to be held on February 24, 1995. Such information is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information relating to this item is set forth under the caption "Share
Ownership of Director Nominees, and Executive Officers" of the Company's Proxy
Statement, to be filed with the SEC on or about December 30, 1994, and to be
distributed in connection with the Company's Annual Meeting of Shareholders to
be held on February 24, 1995. Such information is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
-51-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements: Page
----
See Part II, Item 8. 22
2. Financial Statement Schedules:
Schedule
Number
--------
V Property, Plant and Equipment, at
Original Cost 53
VI Accumulated Provision for Depreciation of
Property, Plant and Equipment 54
VIII Valuation and Qualifying Accounts 55
IX Short-Term Borrowings 56
X Supplementary Income Statement Information 57
3. Exhibits:
See Exhibit Index on page 59.
(b) Reports on Form 8-K filed during the final quarter of fiscal year 1994:
None.
-52-
<PAGE>
SCHEDULE V
PEOPLES ENERGY CORPORATION AND SUBSIDIARY COMPANIES
PROPERTY, PLANT AND EQUIPMENT, AT ORIGINAL COST
(Thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
- ---------------------------------------- ------------ ---------- ----------- ---------- -----------
Balance Transfers Balance
at beginning Additions between at end of
Classification of period at cost Retirements accounts period
- ---------------------------------------- ------------ ---------- ----------- ---------- -----------
Fiscal Year Ended September 30, 1994
------------------------------------
<S> <C> <C> <C> <C> <C>
Public utility facilities:
Gas plant in service -
Production plant $ 124,743 $ 510 $ 4 $ -- $ 125,249
Storage plant 200,336 11,061 727 -- 210,670
Transmission plant 108,231 4,852 10 -- 113,073
Distribution plant 1,390,762 65,375 12,682 (27) 1,443,428
General plant 96,414 10,830 5,336 27 101,935
Gas plant leased to others 6,517 -- -- -- 6,517
Construction work in progress 15,244 (5,782) -- -- 9,462
Gas stored underground - non-current 8,165 311 -- -- 8,476
---------- -------- ------- ------- ----------
Total public utility facilities 1,950,412 87,157 18,759 0 2,018,810
Non-utility property 569 -- -- -- 569
---------- -------- ------- ------- ----------
Total property, plant and equipment, at original cost $1,950,981 $ 87,157(a) $18,759(b) $ 0 $2,019,379
---------- -------- ------- ------- ----------
---------- -------- ------- ------- ----------
<CAPTION>
Fiscal Year Ended September 30, 1993
------------------------------------
<S> <C> <C> <C> <C> <C>
Public utility facilities:
Gas plant in service -
Production plant $ 122,053 $ 224 $ 199 $ 2,665 $ 124,743
Storage plant 176,651 24,773 1,704 616 200,336
Transmission plant 92,741 16,375 12 (873) 108,231
Distribution plant 1,329,688 80,108 21,154 2,120 1,390,762
General plant 85,973 16,137 5,683 (13) 96,414
Gas plant leased to others 6,509 8 -- -- 6,517
Construction work in progress 21,605 (6,361) -- -- 15,244
Gas stored underground - non-current 7,814 351 -- -- 8,165
---------- -------- ------- ------- ----------
Total public utility facilities 1,843,034 131,615 28,752 4,515 1,950,412
Non-utility property 569 -- -- -- 569
---------- -------- ------- ------- ----------
Total property, plant and equipment, at original cost $1,843,603 $131,615(c) $28,752(b) $ 4,515(d) $1,950,981
---------- -------- ------- ------- ----------
---------- -------- ------- ------- ----------
<CAPTION>
Fiscal Year Ended September 30, 1992
------------------------------------
<S> <C> <C> <C> <C> <C>
Public utility facilities:
Gas plant in service -
Production plant $ 121,847 $ 333 $ 84 $ (43) $ 122,053
Storage plant 175,136 1,852 337 -- 176,651
Transmission plant 82,770 8,197 70 1,844 92,741
Distribution plant 1,254,399 93,556 16,437 (1,830) 1,329,688
General plant 80,470 9,677 4,192 18 85,973
Gas plant leased to others 6,509 -- -- -- 6,509
Construction work in progress 16,862 4,743 -- -- 21,605
Gas stored underground - non-current 7,814 -- -- -- 7,814
---------- -------- ------- ------- ----------
Total public utility facilities 1,745,807 118,358 21,120 (11) 1,843,034
Non-utility property 1,044 -- 475 -- 569
---------- -------- ------- ------- ----------
Total property, plant and equipment, at original cost $1,746,851 $118,358(e) $21,595(b) $ (11)(d) $1,843,603
---------- -------- ------- ------- ----------
---------- -------- ------- ------- ----------
( ) Denotes red figure.
<FN>
Notes: (a) Includes construction expenditures of $87,218 less amortization of capital lease of $61.
(b) Represents: 1994 1993 1992
------- ------- -------
Retirements charged to accumulated provision for depreciation (Schedule VI) $18,759 $28,752 $21,577
Cost of land retired at Deerfield -- -- 18
------- ------- -------
$18,759 $28,752 $21,595
------- ------- -------
------- ------- -------
(c) Includes construction expenditures of $131,669 less amortization of capital lease of $54.
(d) Represents the following: 1993 1992
-------- --------
Implementation of Statement of Financial Accounting Standards Number 109 $ 4,515 $ --
Amortization of Capital Lease for Oct. - Dec., 1991 -- (11)
-------- --------
$ 4,515 $ (11)
-------- --------
-------- --------
(e) Includes construction expenditures of $118,084 plus net capital lease of $274.
</TABLE>
-53-
<PAGE>
SCHEDULE VI
PEOPLES ENERGY CORPORATION AND SUBSIDIARY COMPANIES
ACCUMULATED PROVISION FOR DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
(Thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
- ------------------------- ------------ ----------------------- -------------------------------------- -------- ----------
Additions charged to
costs and expenses(a) Deduct Retirements
---------------------- --------------------------------------
Balance Retirement Stores and Balance
at beginning Depreciation Clearing of property Cost of misc. Other at end of
Description of period expense accounts at cost dismantling (salvage) Charges period
- ------------------------- ------------ ------------ -------- ----------- ----------- ---------- ------- ---------
Fiscal Year Ended September 30, 1994
------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Public utility facilities:
Gas plant in service -
Production plant $102,362 $ 2,930 $ -- $ 4 $ 11 $ -- $ -- $105,277
Storage plant 77,509 6,104 -- 727 93 (3) 3 82,799
Transmission plant 27,509 2,079 -- 10 44 -- (686) 28,848
Distribution plant 382,713 47,970 -- 12,682 6,429 (46) 959 412,577
General plant 36,057 5,601 3,901 5,336 3 (333) 572 41,125
-------- ------- ------ ------- ------ ------- ------ --------
Total gas plant in service 626,150 64,684 3,901 18,759 6,580 (382) 848 670,626
Gas plant leased to others 6,372 6 -- -- -- -- -- 6,378
-------- ------- ------ ------- ------ ------- ------ --------
Total public utility facilities 632,522 64,690 3,901 18,759 6,580 (382) 848 677,004
Non-utility property 443 -- -- -- -- -- -- 443
-------- ------- ------ ------- ------ ------- ------ --------
Total accumulated provision
for depreciation $632,965 $64,690 $3,901 $18,759 $6,580 $ (382) $ 848(b) $677,447
-------- ------- ------ ------- ------ ------- ------ --------
-------- ------- ------ ------- ------ ------- ------ --------
<CAPTION>
Fiscal Year Ended September 30, 1993
------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Public utility facilities:
Gas plant in service -
Production plant $ 97,418 $ 2,892 $ -- $ 199 $ 5 $ -- $2,256 $102,362
Storage plant 73,344 5,709 -- 1,704 176 -- 336 77,509
Transmission plant 25,640 1,700 -- 12 3 -- 184 27,509
Distribution plant 364,033 46,164 -- 21,154 6,762 (30) 402 382,713
General plant 32,715 4,342 4,148 5,683 36 (587) (16) 36,057
-------- ------- ------ ------- ------ ------- ------ --------
Total gas plant in service 593,150 60,807 4,148 28,752 6,982 (617) 3,162 626,150
Gas plant leased to others 6,372 -- -- -- -- -- -- 6,372
-------- ------- ------ ------- ------ ------- ------ --------
Total public utility facilities 599,522 60,807 4,148 28,752 6,982 (617) 3,162 632,522
Non-utility property 443 -- -- -- -- -- -- 443
-------- ------- ------ ------- ------ ------- ------ --------
Total accumulated provision
for depreciation $599,965 $60,807 $4,148 $28,752 $6,982 $ (617) $3,162(b) $632,965
-------- ------- ------ ------- ------ ------- ------ --------
-------- ------- ------ ------- ------ ------- ------ --------
Fiscal Year Ended September 30, 1992
------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Public utility facilities:
Gas plant in service -
Production plant $ 94,655 $ 2,834 $ -- $ 84 $ 1 $ (16) $ (2) $ 97,418
Storage plant 68,388 5,297 -- 337 4 -- -- 73,344
Transmission plant 24,083 1,562 -- 70 20 -- 85 25,640
Distribution plant 343,095 44,213 -- 16,437 6,945 (43) 64 364,033
General plant 28,303 3,441 4,124 4,192 4 (1,079) (36) 32,715
-------- ------- ------ ------- ------ ------- ------ --------
Total gas plant in service 558,524 57,347 4,124 21,120 6,974 (1,138) 111 593,150
Gas plant leased to others 6,372 -- -- -- -- -- -- 6,372
-------- ------- ------ ------- ------ ------- ------ --------
Total public utility facilities 564,896 57,347 4,124 21,120 6,974 (1,138) 111 599,522
Non-utility property 730 -- -- 457 -- -- 170 443
-------- ------- ------ ------- ------ ------- ------ --------
Total accumulated provision
for depreciation $565,626 $57,347 $4,124 $21,577 $6,974 $(1,138) $ 281(b) $599,965
-------- ------- ------ ------- ------ ------- ------ --------
-------- ------- ------ ------- ------ ------- ------ --------
( ) Denotes red figure.
<FN>
Notes: (a) See Note 1E of the Notes to Consolidated Financial Statements with respect to the basis for the provision for
depreciation.
(b) Represents the following: 1994 1993 1992
------ ------ ------
Accumulated provision for depreciation applicable to property acquired $ 581 $ -- $ --
Capitalized depreciation transferred 161 154 147
Adjustment for sale of non-utility property -- -- 134
Implementation of Statement of Financial Accounting Standards Number 109 -- 3,039 --
Contractor and Insurance Settlements 100 -- --
Sundry Items - Net 6 (31) --
------ ------ ------
$ 848 $3,162 $ 281
------ ------ ------
------ ------ ------
</TABLE>
-54-
<PAGE>
SCHEDULE VIII
PEOPLES ENERGY CORPORATION AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS
(Thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------------------------------------------------- ------------- --------- -------------------- ----------
Additions Deductions
--------- --------------------
Charged Charges for the
Balance to costs purpose for which the Balance
at beginning and reserves or deferred at end of
Description of period expenses credits were created period
- -------------------------------------------------- ------------- --------- -------------------- ----------
Fiscal Year Ended September 30, 1994
------------------------------------
<S> <C> <C> <C> <C>
RESERVES (deducted from assets in balance sheet):
Uncollectible items $19,789 $32,016 $27,516 $24,289
<CAPTION>
Fiscal Year Ended September 30, 1993
------------------------------------
<S> <C> <C> <C> <C>
RESERVES (deducted from assets in balance sheet):
Uncollectible items $16,755 $22,490 $19,456 $19,789
<CAPTION>
Fiscal Year Ended September 30, 1992
------------------------------------
<S> <C> <C> <C> <C>
RESERVES (deducted from assets in balance sheet):
Uncollectible items $17,426 $19,703 $20,374 $16,755
</TABLE>
-55-
<PAGE>
SCHEDULE IX
PEOPLES ENERGY CORPORATION AND SUBSIDIARY COMPANIES
SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E(a) Column F(b)
- --------------------- ------------- ---------------- ----------------- ----------------- -----------------
Weighted Average Maximum Amount Average Amount Weighted Average
Category of Aggregate Balance at Interest Rate Outstanding Outstanding Interest Rate
Short-Term Borrowings End of period End of Period During the Period During the Period During the Period
- --------------------- ------------- ---------------- ----------------- ----------------- -----------------
(Thousands) (Thousands)
Fiscal Year Ended September 30, 1994
------------------------------------
<S> <C> <C> <C> <C> <C>
Bank Loans $ 900 7.75% $ 900 $ 573 6.66%
Commercial Paper -- -- 123,800 31,739 3.13
<CAPTION>
Fiscal Year Ended September 30, 1993
------------------------------------
<S> <C> <C> <C> <C> <C>
Bank Loans $ -- --% $ 900 $ 417 6.21%
Commercial Paper 68,600 3.21 87,000 25,718 3.26
<CAPTION>
Fiscal Year Ended September 30, 1992
------------------------------------
<S> <C> <C> <C> <C> <C>
Bank Loans $ 900 6.00% $ 900 $ 838 6.74%
Commercial Paper 28,000 3.24 28,000 4,638 4.30
<FN>
(a) Computed by multiplying the amounts outstanding by the days
outstanding and dividing the results by the number of days used.
(b) Computed by dividing the applicable interest expense by the
average amount outstanding during the period.
</TABLE>
-56-
<PAGE>
SCHEDULE X
PEOPLES ENERGY CORPORATION AND SUBSIDIARY COMPANIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
Maintenance, depreciation, royalties, and advertising costs, other than
those specifically disclosed in the Consolidated Statements of Income, are not
significant.
Significant taxes charged to costs and expenses, other than payroll and
income taxes, are summarized as follows:
<TABLE>
<CAPTION>
Fiscal Years Ended September 30, 1994 1993 1992
- ------------------------------------------------------------------------
(Thousands)
<S> <C> <C> <C>
Illinois public utility $ 47,481 $ 48,297 $ 44,868
Municipal public utility 84,130 82,305 72,430
Other 12,315 12,451 12,400
- ------------------------------------------------------------------------
Total $143,926 $143,053 $129,698
- ------------------------------------------------------------------------
</TABLE>
-57-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
PEOPLES ENERGY CORPORATION
Date: December 22, 1994 By: /s/ RICHARD E. TERRY
-------------------------------
Richard E. Terry
Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities indicated on December 22, 1994.
/s/ RICHARD E. TERRY Chairman of the Board and Chief
- ------------------------------- Executive Officer and Director
Richard E. Terry (Principal Executive Officer)
/s/ KENNETH S. BALASKOVITS Vice President and Controller
- ------------------------------ (Principal Financial and
Kenneth S. Balaskovits Accounting Officer)
/s/ J. BRUCE HASCH Director
- ------------------------------
J. Bruce Hasch
/s/ MICHAEL S. REEVES Director
- ------------------------------
Michael S. Reeves
/s/ PASTORA SAN JUAN CAFFERTY Director
- ------------------------------
Pastora San Juan Cafferty
/s/ FRANKLIN A. COLE Director
- ------------------------------
Franklin A. Cole
/s/ FREDERICK C. LANGENBERG Director
- ------------------------------
Frederick C. Langenberg
/s/ H. J. LIVINGSTON, JR. Director
- ------------------------------
H. J. Livingston, Jr.
/s/ WILLIAM G. MITCHELL Director
- ------------------------------
William G. Mitchell
/s/ EARL L. NEAL Director
- ------------------------------
Earl L. Neal
/s/ RICHARD P. TOFT Director
- ------------------------------
Richard P. Toft
/s/ ARTHUR R. VELASQUEZ Director
- ------------------------------
Arthur R. Velasquez
-58-
<PAGE>
PEOPLES ENERGY CORPORATION AND SUBSIDIARY COMPANIES
EXHIBIT INDEX
(a) The exhibits listed below are filed herewith and made a part thereof:
Exhibit
Number Description of Document
------- ----------------------------------------------
3(a) Amendment to the By-Laws of the Registrant,
dated February 24, 1994.
3(b) By-Laws of the Registrant, as amended on
February 24, 1994.
3(c) Amendment to the By-Laws of the Registrant,
dated December 7, 1994.
3(d) By-Laws of the Registrant, as amended on
December 7, 1994.
10(a) Short-Term Incentive Compensation Plan of the
Registrant, as amended on December 7, 1994.
10(b) Executive Deferred Compensation Plan of the
Registrant, effective October 1, 1994.
10(c) Supplemental Retirement Benefit Plan, Part A,
Part B and Part C, of the Registrant, effective
December 7, 1994.
10(d) Firm Transportation Service Agreement Under Rate
Schedule FT between Peoples Gas and Trunkline
Gas Company, dated as of December 1, 1993.
10(e) Firm Transportation Service Agreement Under Rate
Schedule FTS between North Shore Gas and
Natural Gas Pipeline Company of America,
dated as of February 1, 1994.
23 Arthur Andersen LLP consent to incorporation
by reference in Registration Statement
Nos. 2-82760, 2-88307, 33-6369, and 33-6370.
27 Financial Data Schedule
99 Form 11-K for the Employee Stock Purchase Plan
of the Registrant for the fiscal year ended
September 30, 1994.
-59-
<PAGE>
PEOPLES ENERGY CORPORATION AND SUBSIDIARY COMPANIES
EXHIBIT INDEX (Continued)
(b) Exhibits listed below have been filed heretofore with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended,
and/or the Securities Exchange Act of 1934, as amended, and are
incorporated herein by reference. The file number and exhibit number of
each such exhibit are stated in the description of such exhibits.
Exhibit
Number Description of Document
------- ------------------------------------------------------------
3(e) Articles of Incorporation of the Registrant, as amended on
February 1, 1980 (Registrant Form 10-K for fiscal year ended
September 30, 1980, Exhibit 3(a)).
4(a) The Peoples Gas Light and Coke Company First and Refunding
Mortgage, dated January 2, 1926, from Chicago By-Product
Coke Company to Illinois Merchants Trust Company, Trustee,
assumed by The Peoples Gas Light and Coke Company (Peoples)
by Indenture dated March 1, 1928 (Peoples - May 17, 1935,
Exhibit B-6a, Exhibit B-6b A-2 File No. 2-2151, 1936);
Supplemental Indenture dated as of May 20, 1936, (Peoples -
Form 8-K for the year 1936, Exhibit B-6f); Supplemental
Indenture dated as of March 10, 1950 (Peoples - Form 8-K for
the month of March 1950, Exhibit B-6i); Supplemental
Indenture dated as of June 1, 1951 (Peoples - File No. 2-
8989, Post-Effective, Exhibit 7-4(b)); Supplemental
Indenture dated as of July 15, 1966 (Peoples - Form 8-K for
the month of July 1966, Exhibit 2); Supplemental Indenture
dated as of August 15, 1967 (Peoples - File No. 2-26983,
Post-Effective, Exhibit 2-4); Supplemental Indenture dated
as of September 15, 1970 (Peoples - File No. 2-38168, Post-
Effective Exhibit 2-2); Supplemental Indenture dated as of
April 1, 1972 (Peoples - File No. 2-43367, Post-Effective
Exhibit 2-2); Supplemental Indenture dated as of July 15,
1973 (Peoples - File No. 2-48430, Exhibit 4-2); Supplemental
Indenture dated as of June 1, 1984, and Supplemental
Indenture dated as of October 1, 1984 (Peoples - Form 10-K
for fiscal year ended September 30, 1984, Exhibits 4-1, 4-2
and 4-3, respectively); Supplemental Indentures dated March
1, 1985, (Peoples - Form 10-K for fiscal year ended
September 30, 1985, Exhibits 4-1, 4-2, 4-3, 4-4,
respectively); Supplemental Indenture dated May 1, 1990
(Peoples - Form 10-K for the fiscal year ended September 30,
1990, Exhibit 4); Supplemental Indenture dated as of
April 1, 1993 (Peoples - Form 8 dated as of May 5, 1993,
Exhibit 1); Supplemental Indenture dated as of December 1,
1993 (Peoples - Form 10-Q for the quarterly period ended
December 31, 1993, Exhibits 4(a) and 4(b)).
4(b) North Shore Gas Company (North Shore) Indenture, dated as of
April 1, 1955, from North Shore to Continental Bank,
National Association, as Trustee; Third Supplemental
Indenture, dated as of December 20, 1963 (North Shore - File
No. 2-35965, Exhibit 4-1); Fifth Supplemental Indenture
dated as of February 1, 1970 (North Shore - File No. 2-
35965, Exhibit 4-2); Sixth Supplemental Indenture dated as
of October 1, 1973 (North Shore) - Form 10-K for the fiscal
year ended September 30, 1980, Exhibit 4-3); Seventh
Supplemental
-60-
<PAGE>
PEOPLES ENERGY CORPORATION AND SUBSIDIARY COMPANIES
EXHIBIT INDEX (Continued)
Exhibit
Number Description of Document
------ ------------------------------------------------------------
4(b) Indenture dated as of February 15, 1977 (North Shore - Form
cont. 10-K for the fiscal year ended September 30, 1980, Exhibit
4-4; Eighth Supplemental Indenture dated as of September 15,
1980 (North Shore - Form 10-K for the fiscal year ended
September 30, 1980, Exhibit 4-5); Ninth Supplemental
Indenture dated as of December 1, 1987 (North Shore - Form
10-K for the fiscal year ended September 30, 1987, Exhibit
4); Tenth Supplemental Indenture dated as of
November 1, 1990 (North Shore - Form S-3 Registration
Statement No. 33-37332, Exhibit 4b); and Eleventh
Supplemental Indenture dated as of October 1, 1992 (North
Shore - Form 10-K for the fiscal year ended September 30,
1992, Exhibit 4): Twelfth Supplemental Indenture dated as of
April 1, 1993 (North Shore - Form 8-K dated April 23, 1993,
Exhibit 4).
10(f) Storage Service Agreement Under Rate Schedule S-1 between
Peoples Gas and Natural Gas Pipeline Company of America,
dated as of November 30, 1990 (Registrant Form 10-K for
fiscal year ended September 30, 1993, Exhibit 10(a)); Firm
Transportation Service Agreement Under Rate Schedule FTS
between Peoples Gas and Natural Gas Pipeline Company of
America, dated as of August 13, 1990 (Registrant Form 10-K
for fiscal year ended September 30, 1993, Exhibit 10(b));
Firm Transportation Service Agreement Under Rate Schedule
FTS between Peoples Gas and Natural Gas Pipeline Company of
America, dated as of October 8, 1990 (Registrant Form 10-K
for fiscal year ended September 30, 1993, Exhibit 10(c));
Firm Transportation Service Agreement Under Rate Schedule
FTS between Peoples Gas and Natural Gas Pipeline Company of
America, dated as of October 8, 1990 (Registrant Form 10-K
for fiscal year ended September 30, 1993, Exhibit 10(d));
Firm Transportation Service Agreement Under Rate Schedule
FTS between Peoples Gas and Natural Gas Pipeline Company of
America, dated as of January 1, 1992 (Registrant Form 10-K
for fiscal year ended September 30, 1993, Exhibit 10(e));
Firm Transportation Service Agreement Under Rate Schedule
FTS between Peoples Gas and Natural Gas Pipeline Company of
America, dated as of January 1, 1992 (Registrant Form 10-K
for fiscal year ended September 30, 1993, Exhibit 10(f));
Firm Transportation Service Agreement Under Rate Schedule
FTS between Peoples Gas and Natural Gas Pipeline Company of
America, dated as of January 1, 1992 (Registrant Form 10-K
for fiscal year ended September 30, 1993, Exhibit 10(g));
Firm Transportation Service Agreement Under Rate Schedule
FTS between Peoples Gas and Natural Gas Pipeline Company of
America, dated as of February 1, 1992 (Registrant Form 10-K
for fiscal year ended September 30, 1993, Exhibit 10(h));
Storage Service Agreement Under Rate Schedule S-1 between
North Shore Gas and Natural Gas Pipeline Company of America,
dated as of November 30, 1990 (Registrant Form 10-K for
fiscal year ended September 30, 1993, Exhibit 10(i)).
-61-
<PAGE>
PEOPLES ENERGY CORPORATION AND SUBSIDIARY COMPANIES
EXHIBIT INDEX (Continued)
Exhibit
Number Description of Document
10(g) Lease dated October 20, 1993, between Prudential Plaza
Associates, as Landlord, and Peoples Gas, as Tenant
(Registrant Form 10-Q for the quarterly period ended
December 31, 1993, Exhibit 10(a)).
10(h) Firm Transportation Service Agreement Under Rate Schedule
FTS between Peoples Gas and Natural Gas Pipeline Company of
America, dated as of December 1, 1993 (Registrant Form 10-Q
for the quarterly period ended December 31, 1993, Exhibit
10(b)); Firm Transportation Service Agreement Under Rate
Schedule S-2 between Peoples Gas and Natural Gas Pipeline
Company of America, dated as of December 1, 1993 (Registrant
Form 10-Q for the quarterly period ended December 31, 1993,
Exhibit 10(c)); Firm Transportation Service Agreement Under
Rate Schedule S-2 between North Shore Gas and Natural Gas
Pipeline Company of America, dated as of December 1, 1993
(Registrant Form 10-Q for the quarterly period ended
December 31, 1993, Exhibit 10(d)); Firm Transportation
Service Agreement Under Rate Schedule FTS between North
Shore Gas and Natural Gas Pipeline Company of America, dated
as of December 1, 1993 (Registrant Form 10-Q for the
quarterly period ended December 31, 1993, Exhibit 10(e)).
10(i) Construction Guaranty Agreement dated December 16, 1992, by
the Company and Trigen Energy Corporation (Registrant Form
10-Q for the quarterly period ended December 31, 1993,
Exhibit 10(f)); Service Guaranty Agreement dated
December 16, 1992, by the Company and Trigen Energy
Corporation (Registrant Form 10-Q for the quarterly period
ended December 31, 1993, Exhibit 10(g)).
21 Subsidiaries of the Registrant (Registrant Form 10-K for the
fiscal year ended September 30, 1982, Exhibit 22).
-62-
<PAGE>
EXHIBIT 3(a)
CERTIFIED COPY OF RESOLUTIONS
I, E. P. CASSIDY, Secretary of PEOPLES ENERGY CORPORATION (herein
called the "Company"), DO HEREBY CERTIFY that the following is a true and
correct copy of certain resolutions unanimously adopted by written consent of
the Board of Directors of said Company on December 1, 1993, and said resolutions
have not been amended, rescinded or revoked and the same remain in full force
and effect:
RESOLVED, That, effective as of the close of business
on February 24, 1994, Section 3.1 of Article III of the By-
Laws of the Company be, and it hereby is, amended by
deleting said Section in its entirety and substituting the
following in lieu thereof:
ARTICLE III
DIRECTORS AND COMMITTEES
SECTION 3.1. NUMBER AND ELECTION. The business and
affairs of the Company shall be managed and controlled by a
Board of Directors, eleven (11) in number, none of whom need
to be a shareholder, which number may be altered from time
to time by amendment of these by-laws, but shall never be
less than three (3). Except as provided in the Articles of
Incorporation, the directors shall be elected by the
shareholders entitled to vote at the annual meeting of such
shareholders and each director shall be elected to serve for
a term of one (1) year and thereafter until his successor
shall be elected and shall qualify.
RESOLVED FURTHER, That the Secretary of the Company be,
and he hereby is, directed to initial a copy of the amended
By-Laws presented at this meeting and place it with the
important papers of this meeting.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal
of the Company this 7th day of December, 1994.
/s/ E. P. CASSIDY
--------------------
Secretary
<PAGE>
EXHIBIT 3(b)
BY-LAWS
OF
PEOPLES ENERGY CORPORATION
AMENDED FEBRUARY 24, 1994
<PAGE>
PEOPLES ENERGY CORPORATION
BY-LAWS
ARTICLE I - OFFICES
ARTICLE II - MEETINGS OF SHAREHOLDERS
ARTICLE III - DIRECTORS AND COMMITTEES
ARTICLE IV - OFFICERS
ARTICLE V - INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYES
ARTICLE VI - CERTIFICATES OF STOCK AND THEIR TRANSFER
ARTICLE VII - MISCELLANEOUS (CONTRACTS)
ARTICLE VIII - AMENDMENT OR REPEAL OF BY-LAWS
<PAGE>
PEOPLES ENERGY CORPORATION
INDEX
PAGE
----
A
Amendment of By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Appointment of Officers. . . . . . . . . . . . . . . . . . . . . . . . . 8
Assistant Controller, Duties of. . . . . . . . . . . . . . . . . . . . . 11
Assistant General Counsel, Duties of . . . . . . . . . . . . . . . . . . 11
Assistant Secretary, Duties of . . . . . . . . . . . . . . . . . . . . . 11
Assistant Treasurer, Duties of . . . . . . . . . . . . . . . . . . . . . 11
Assistant Vice President, Duties of. . . . . . . . . . . . . . . . . . . 9
B
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
C
Certificates of Stock and Their Transfer . . . . . . . . . . . . . . . . 12
Chairman of the Board, Duties of . . . . . . . . . . . . . . . . . . . . 8
Chairman of the Executive Committee. . . . . . . . . . . . . . . . . . . 6
Committees
Executive. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Controller, Duties of. . . . . . . . . . . . . . . . . . . . . . . . . . 10
Contracts, Execution of. . . . . . . . . . . . . . . . . . . . . . . . . 14
D
Directors and Committees . . . . . . . . . . . . . . . . . . . . . . . . 4
E
Election of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . 4
Election of Officers . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Executive Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
F
Fees and Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . 7
<PAGE>
PEOPLES ENERGY CORPORATION
PAGE
----
G
General Counsel, Duties of . . . . . . . . . . . . . . . . . . . . . . . 10
I
Indemnification of Directors, Officers and Employees . . . . . . . . . . 11
M
Meetings
Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Action Without Meeting . . . . . . . . . . . . . . . . . . . . . . . 6
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
N
Notice of Meetings
Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
O
Officers
Appointed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Elected. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Offices, Two or More Held By One Person. . . . . . . . . . . . . . . . . 7
P
President, Duties of . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Presiding Officer
Board Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Shareholders Meetings. . . . . . . . . . . . . . . . . . . . . . . . . 3
Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Q
Quorum
Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
<PAGE>
PEOPLES ENERGY CORPORATION
PAGE
----
S
Secretary, Duties of . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Signatures to Checks, Drafts, etc. . . . . . . . . . . . . . . . . . . . 14
Stock, Certificates of and their Transfer. . . . . . . . . . . . . . . . 12
T
Treasurer, Duties. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
V
Vice President, Duties of. . . . . . . . . . . . . . . . . . . . . . . . 9
Voting
Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Stock Owned by Company. . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
BY-LAWS
OF
PEOPLES ENERGY CORPORATION
ARTICLE I
OFFICES
SECTION 1.1. PRINCIPAL OFFICE. The principal office of the Company
shall be in the City of Chicago, County of Cook and State of Illinois.
SECTION 1.2. OTHER OFFICES. The Company may also have offices at
such other places both within and without the State of Illinois as the Board of
Directors may from time to time determine or the business of the Company may
require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 2.1. ANNUAL MEETING. The annual meeting of the shareholders
shall be held on the fourth Friday of the month of February in each year, if not
a legal holiday, or, if a legal holiday, then on the next succeeding business
day, for the purpose of electing directors and for the transaction of such other
business as may come before the meeting. If the election of directors shall not
be held on the day herein designated for the annual meeting, or at any
adjournment thereof, the Board of Directors shall cause such election to be held
at a special meeting of the shareholders as soon thereafter as convenient.
SECTION 2.2. SPECIAL MEETINGS. Except as otherwise prescribed by
statute, special meetings of the shareholders for any purpose or purposes, may
be
<PAGE>
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called by the Chairman of the Board, the Vice Chairman of the Executive
Committee, the Executive Committee or the President. Such request shall state
the purpose or purposes of the proposed meeting.
SECTION 2.3. PLACE OF MEETINGS. Each meeting of the shareholders
for the election of the directors shall be held at the principal office of the
Company in the City of Chicago, Illinois, unless the Board of Directors shall by
resolution designate another place as the place of such meeting. Meetings of
shareholders for any other purpose may be held at such place, and at such time
as shall be determined by the Chairman of the Board, or the President, or in
their absence, by the Secretary, and stated in the notice of the meeting or in a
duly executed waiver of notice thereof.
SECTION 2.4. NOTICE OF MEETINGS. Written or printed notice stating
the place, date and hour of each annual or special meeting of the shareholders,
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called, shall be given not less than 10 or more than 60 days before
the date of the meeting, except as otherwise provided by statute. Notice of any
meeting of the shareholders may be waived by any shareholder.
SECTION 2.5. QUORUM. The holders of a majority of the shares issued
and outstanding and entitled to vote thereat, present in person or represented
by proxy, shall be requisite for, and shall constitute, a quorum at all meetings
of the shareholders of the Company for the transaction of business, except as
otherwise provided by statute or these by-laws. If a quorum shall not be
present or represented at any meeting of the shareholders, the shareholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time
<PAGE>
-3-
to time, without notice other than announcement at the meeting if the
adjournment is for thirty days or less or unless after that adjournment a new
record date is fixed, until a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed.
SECTION 2.6. PROXIES. At every meeting of the shareholders, each
shareholder having the right to vote thereat shall be entitled to vote in person
or by proxy. Such proxy shall be appointed by an instrument in writing
subscribed by such shareholder and bearing a date not more than eleven months
prior to such meeting, unless such proxy provides for a longer period, and shall
be filed with the Secretary of the Company before, or at the time of, the
meeting.
SECTION 2.7. VOTING. At each meeting of the shareholders, each
shareholder shall be entitled to one vote for each share of stock entitled to
vote thereat which is registered in the name of such shareholder on the books of
the Company. At all elections of directors of the Company, the holders of
shares of stock of the Company shall be entitled to cumulative voting. When a
quorum is present at any meeting of the shareholders, the vote of the holders of
a majority of the shares present in person or represented by proxy and entitled
to vote at the meeting shall be sufficient for the transaction of any business,
unless otherwise provided by statute, the Articles of Incorporation or these by-
laws.
SECTION 2.8. PRESIDING OFFICER. The presiding officer of any
meeting of the shareholders shall be the Chairman of the Board or, in the case
of the absence of the Chairman of the Board, the President.
<PAGE>
-4-
ARTICLE III
DIRECTORS AND COMMITTEES
SECTION 3.1. NUMBER AND ELECTION. The business and affairs of the
Company shall be managed and controlled by a Board of Directors, eleven (11) in
number, none of whom need to be a shareholder, which number may be altered from
time to time by amendment of these by-laws, but shall never be less than three
(3). Except as provided in the Articles of Incorporation, the directors shall
be elected by the shareholders entitled to vote at the annual meeting of such
shareholders and each director shall be elected to serve for a term of one (1)
year and thereafter until his successor shall be elected and shall qualify.
SECTION 3.2. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held immediately, or as soon as practicable, after the annual
meeting of the shareholders in each year for the purpose of electing officers
and for the transaction of such other business as may be deemed necessary, and
regular meetings of the Board shall be held at such date and time and at such
place as the Board of Directors may from time to time determine. Not less than
two days' notice of all regular meetings of the Board, except the meeting to be
held after the annual meeting of shareholders which shall be held without other
notice than this by-law, shall be given to each director personally or by mail
or telegram.
SECTION 3.3. SPECIAL MEETINGS. Special meetings of the Board may be
called at any time by the Chairman of the Board, the President, or by any two
directors, by causing the Secretary to mail to each director, not less than
three days
<PAGE>
-5-
before the time of such meeting, a written notice stating the time and place of
such meeting. Notice of any meeting of the Board may be waived by any director.
SECTION 3.4. QUORUM. At each meeting of the Board of Directors, the
presence of not less than a majority of the total number of directors specified
in Section 3.l hereof shall be necessary and sufficient to constitute a quorum
for the transaction of business, and the act of a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors, except as may be otherwise specifically provided by statute. If a
quorum shall not be present at any meeting of directors, the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present. In determining
the presence of a quorum at a meeting of the directors or a committee thereof
for the purpose of authorizing a contract or transaction between the Company and
one or more of its directors, or between the Company and any other corporation,
partnership, association, or other organization in which one or more of the
directors of this Company are directors or officers, or have a financial
interest in such other organization, such interested director or directors may
be counted in determining a quorum.
SECTION 3.5. PRESIDING OFFICER. The presiding officer of any
meeting of the Board of Directors shall be the Chairman of the Board. In the
case of the absence of the Chairman of the Board, for reasons other than
provided in Section 4.3, the President shall act in his place and stead. In the
case of the temporary absence of both the Chairman of the Board and the
President, the Vice Chairman of the
<PAGE>
-6-
Executive Committee or, in his absence, any other director elected by vote of a
majority of the directors present at the meeting, shall act as chairman of the
meeting.
SECTION 3.6. EXECUTIVE COMMITTEE. The Executive Committee of the
Board of Directors shall consist of the Chairman of the Board who shall be the
Chairman of the Executive Committee, and each of the nonmanagement directors.
The Chairman of the Board shall select a Vice Chairman of the Executive
Committee subject to the approval of the Board of Directors of the Company. The
Executive Committee shall, in the recess of the Board, have all the powers of
the Board except those powers which, under the law of the State of Illinois, may
not be exercised by such Committee and shall keep a record of its proceedings
and report the same to the Board. The Executive Committee may meet at any place
whenever required by a member of the Committee and may act by the consent of a
majority of its members, although not formally convened.
SECTION 3.7. OTHER COMMITTEES. The Board may appoint other
committees, standing or special, from time to time from among its own members or
otherwise, and may confer such powers on such committees as the Board may
determine and may revoke such powers and terminate the existence of such
committees at its pleasure.
SECTION 3.8. ACTION WITHOUT MEETING. Any action required or
permitted to be taken at any meeting of the Board of Directors, or any committee
thereof, may be taken without a meeting if all members of the Board or of such
committee, as the case may be, consent thereto in writing and such writing or
writings are filed with the minutes of the proceedings of the Board or such
committee.
<PAGE>
-7-
SECTION 3.9. FEES AND COMPENSATION OF DIRECTORS. Directors shall
not receive any stated salary for their services as such; but, by resolution of
the Board of Directors, reasonable fees, with or without expenses of attendance,
may be allowed. Members of the Board shall be allowed their reasonable
traveling expenses when actually engaged in the business of the Company, to be
audited and allowed as in other cases of demands against the Company. Members
of standing or special committees may be allowed fees and expenses for attending
committee meetings. Nothing herein contained shall be construed to preclude any
director from serving the Company in any other capacity and receiving
compensation therefor.
ARTICLE IV
OFFICERS
SECTION 4.1. ELECTION OF OFFICERS. There shall be elected by the
Board of Directors in each year the following officers: a Chairman of the
Board; a President; such number of Senior Vice Presidents, such number of
Executive Vice Presidents, such number of Vice Presidents and such number of
Assistant Vice Presidents as the Board at the time may decide upon; a Secretary;
such number of Assistant Secretaries as the Board at the time may decide upon; a
Treasurer; such number of Assistant Treasurers as the Board at the time may
decide upon; a Controller; and such number of Assistant Controllers as the Board
at the time may decide upon; a General Counsel; and such number of Assistant
General Counsel as the Board at the time may decide upon. Any two or more
offices may be held by one person, except that the offices of President and
Secretary may not be held by the same person. All officers shall hold their
respective offices during the pleasure of the Board.
<PAGE>
-8-
SECTION 4.2. APPOINTMENT OF OFFICERS. The Board of Directors, the
Executive Committee, the Chairman of the Board, or the President may from time
to time appoint such other officers as may be deemed necessary, including one or
more Vice Presidents, one or more Assistant Vice Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, one or more Assistant
Controllers and one or more Assistant General Counsel, and such other agents and
employes of the Company as may be deemed proper. Such officers, agents and
employes shall have such authority, perform such duties and receive such
compensation as the Board of Directors, the Executive Committee or, in the case
of appointments made by the Chairman of the Board or the President, as the
Chairman of the Board or the President, may from time to time prescribe and
determine. The Board of Directors or the Executive Committee may from time to
time authorize any officer to appoint and remove agents and employes, to
prescribe their powers and duties and to fix their compensation therefor.
SECTION 4.3. DUTIES OF CHAIRMAN OF THE BOARD. The Chairman of the
Board shall be the chief executive officer of the Company and shall have control
and direction of the management and affairs of the Company and may execute all
contracts, deeds, assignments, certificates, bonds or other obligations for and
on behalf of the Company, and sign certificates of stock and records of
certificates required by law to be signed by the Chairman of the Board. When
present, the Chairman of the Board shall preside at all meetings of the Board
and of the shareholders. In the absence of the Chairman of the Board, due to
his permanent disability, death, resignation or removal from office, the Vice
Chairman of the Executive Committee shall promptly convene the
<PAGE>
-9-
Executive Committee to select a nominee for that office and submit said
nominee's name to the Board of Directors for their consideration.
SECTION 4.4. DUTIES OF PRESIDENT. Subject to the Control and
direction of the Chairman of the Board, and to the control of the Board, the
President shall have general management of all the business of the Company, and
he shall have such other powers and perform such other duties as may be
prescribed for him by the Board or be delegated to him by the Chairman of the
Board. He shall possess the same power as the Chairman of the Board to sign all
certificates, contracts and other instruments of the Company. In case of the
absence or disability of the President, or in case of his death, resignation or
removal from office, the powers and duties of the President shall devolve upon
the Chairman of the Board during absence or disability, or until the vacancy in
the office of President shall be filled.
SECTION 4.5. DUTIES OF VICE PRESIDENT. Each of the Senior Vice
Presidents, Executive Vice Presidents, Vice Presidents and Assistant Vice
Presidents shall have such powers and duties as may be prescribed for him by the
Board, or be delegated to him by the Chairman of the Board or by the President.
Each of such officers shall possess the same power as the President to sign all
certificates, contracts and other instruments of the Company.
SECTION 4.6. DUTIES OF SECRETARY. The Secretary shall have the
custody and care of the corporate seal, records and minute books of the Company.
He shall attend the meetings of the Board, of the Executive Committee, and of
the shareholders, and duly record and keep the minutes of the proceedings, and
file and take charge of all papers and documents belonging to the general files
of the Company, and shall
<PAGE>
-10-
have such other powers and duties as are commonly incident to the office of
Secretary or as may be prescribed for him by the Board, or be delegated to him
by the Chairman of the Board or by the President.
SECTION 4.7. DUTIES OF TREASURER. The Treasurer shall have charge
of, and be responsible for, the collection, receipt, custody and disbursement of
the funds of the Company, and shall deposit its funds in the name of the Company
in such banks, trust companies or safety deposit vaults as the Board may direct.
He shall have the custody of the stock record books and such other books and
papers as in the practical business operations of the Company shall naturally
belong in the office or custody of the Treasurer, or as shall be placed in his
custody by the Board, the Chairman of the Board, the President, or any Vice
President, and shall have such other powers and duties as are commonly incident
to the office of Treasurer, or as may be prescribed for him by the Board, or be
delegated to him by the Chairman of the Board or by the President.
SECTION 4.8. DUTIES OF CONTROLLER. The Controller shall have
control over all accounting records pertaining to moneys, properties, materials
and supplies of the Company. He shall have Charge of the bookkeeping and
accounting records and functions, the related accounting information systems and
reports and executive supervision of the system of internal accounting controls,
and such other powers and duties as are commonly incident to the office of
Controller or as may be prescribed by the Board, or be delegated to him by the
Chairman of the Board or by the President.
SECTION 4.9. DUTIES OF GENERAL COUNSEL. The General Counsel shall
have full responsibility for all legal advice, counsel and services for the
Company and
<PAGE>
-11-
its subsidiaries including employment and retaining of attorneys and law firms
as shall in his discretion be necessary or desirable and shall have such other
powers and shall perform such other duties as from time to time may be assigned
to him by the Board, the Chairman of the Board or the President.
SECTION 4.10. DUTIES OF ASSISTANT SECRETARY, ASSISTANT TREASURER,
ASSISTANT CONTROLLER AND ASSISTANT GENERAL COUNSEL. The Assistant Secretary,
Assistant Treasurer, Assistant Controller and Assistant General Counsel shall
assist the Secretary, Treasurer, Controller, and General Counsel, respectively,
in the performance of the duties assigned to each and shall for such purpose
have the same powers as his principal. He shall also have such other powers and
duties as may be prescribed for him by the Board, or be delegated to him by the
Chairman of the Board or by the President.
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
The Company shall indemnify any person who was or is a party, or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative by
reason of the fact that he is or was a director, officer, employee or agent of
the Company, or, at the request of the Company, is or was serving another
corporation, partnership, joint venture, trust or other enterprise in any
capacity, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding, to the full extent permitted by the
Business Corporation Act of the State of Illinois from time to
<PAGE>
-12-
time in effect. The indemnification provided by this Article V shall not be
deemed exclusive of any other rights to which those seeking indemnification may
be entitled under any statute, by-law, agreement, vote of shareholders or
disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director, officer, employee
or agent, and shall inure to the benefit of their heirs, executors and
administrators of such a person.
ARTICLE VI
CERTIFICATES OF STOCK AND THEIR TRANSFER
SECTION 6.1. CERTIFICATES OF STOCK. The certificates of stock of
the Company shall be in such form as may be determined by the Board of
Directors, shall be numbered and shall be entered in the books of the Company as
they are issued. They shall exhibit the holder's name and number of shares and
shall be signed by the Chairman of the Board, the President or a Vice President
and also by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary and shall bear the corporate seal or a facsimile thereof.
If a certificate is countersigned by a transfer agent or registrar, other than
the Company itself or its employe, any other signature or countersignature on
the certificate may be facsimiles. In case any officer of the Company, or any
officer or employe of the transfer agent or registrar, who has signed or whose
facsimile signature has been placed upon such certificate ceases to be an
officer of the Company, or an officer or employe of the transfer agent or
registrar, before such certificate is issued, said certificate may be issued
with the same effect as
<PAGE>
-13-
if the officer of the Company, or the officer or employe of the transfer agent
or registrar, had not ceased to be such at the date of issue.
SECTION 6.2. TRANSFER OF STOCK. Upon surrender to the Company of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, and upon payment of applicable
taxes with respect to such transfer, it shall be the duty of the Company,
subject to such rules and regulations as the Board of Directors may from time to
time deem advisable concerning the transfer and registration of certificates for
shares of stock of the Company, to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon its
books.
SECTION 6.3. SHAREHOLDERS OF RECORD. The Company shall be entitled
to treat the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part or any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by statute.
SECTION 6.4. LOST, DESTROYED OR STOLEN CERTIFICATES. The Board of
Directors, in individual cases or by general resolution, may direct a new
certificate or certificates to be issued by the Company as a replacement for a
certificate or certificates for a like number of shares alleged to have been
lost, destroyed or stolen, upon the making of an affidavit of that fact by the
person claiming the certificate or certificates of stock to be lost, destroyed
or stolen. When authorizing such issue of a new certificate or certificates,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, destroyed
<PAGE>
-14-
or stolen certificate or certificates, or his legal representative, to give the
Company a bond in such form and amount as it may direct as indemnity against any
claim that may be made against the Company with respect to the certificate or
certificates alleged to have been lost, destroyed or stolen.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. CONTRACTS AND OTHER INSTRUMENTS. All contracts or
obligations of the Company shall be in writing and shall be signed either by the
Chairman of the Board, the President, or any Vice President and, unless the
Board shall otherwise determine and direct, the seal of the Company shall be
attached thereto, duly attested by the Secretary or an Assistant Secretary,
except contracts entered into in the ordinary course of business where the
amount involved is less than One Hundred Thousand Dollars ($100,000), and except
contracts for the employment of servants or agents, which contracts so excepted
may be entered into by the Chairman of the Board, the President, any Vice
President, or by such officers or agents as the Chairman of the Board or the
President may designate and authorize. Unless the Board shall otherwise
determine and direct, all checks or drafts and all promissory notes shall be
signed by two officers of the Company. When prescribed by the Board, bonds,
promissory notes, and other obligations of the Company may bear the facsimile
signature of the officer who is authorized to sign such instruments and,
likewise, may bear the facsimile signature of the Secretary or an Assistant
Secretary.
<PAGE>
-15-
SECTION 7.2. VOTING STOCK OWNED BY COMPANY. Any or all shares owned
by the Company in any other corporation, and any or all voting trust
certificates owned by the Company calling for or representing shares of stock of
any other corporation, may be voted by the Chairman of the Board, the President,
any Vice President, the Secretary or the Treasurer, either in person or by
written proxy given to any person in the name of the Company at any meeting of
the shareholders of such corporation, or at any meeting of voting trust
certificate holders, upon any question that may be presented at any such
meeting. Any such officer, or anyone so representing him by written proxy, may
on behalf of the Company waive any notice of any such meeting required by any
statute or by-law and consent to the holding of such meeting without notice.
ARTICLE VIII
AMENDMENT OR REPEAL OF BY-LAWS
These by-laws may be added to, amended or repealed at any regular or
special meeting of the Board by a vote of a majority of the membership of the
Board.
<PAGE>
EXHIBIT 3(c)
CERTIFIED COPY OF RESOLUTION
I, F. J. RUDOW, Assistant Secretary of PEOPLES ENERGY CORPORATION
(herein called the "Company"), DO HEREBY CERTIFY that the following is a true
and correct copy of a certain resolution unanimously adopted by written consent
of the Board of Directors of said Company on December 7, 1994, and said
resolution has not been amended, rescinded or revoked and the same remain in
full force and effect:
RESOLVED, That this Board of Directors hereby approves
amendment to the Company's By-Laws, such amendment to be
effective December 7, 1994, by replacing Article V of the
By-Laws in its entirety with the following:
ARTICLE V
Indemnification of Directors,
Officers, Employees and Agents
------------------------------
SECTION 5.1. INDEMNIFICATION OF DIRECTORS, OFFICERS AND
EMPLOYEES. The Company shall indemnify, to the fullest
extent permitted under the laws of the State of Illinois and
any other applicable laws, as they now exist or as they may
be amended in the future, any person who was or is a party,
or is threatened to be made a party, to any threatened,
pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (including,
without limitation, an action by or in the right of the
Company), by reason of the fact that he or she is or was a
director, officer or employee of the Company, or is or was
serving at the request of the Company as a director,
officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or
other enterprise against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in
connection with such action, suit or proceeding.
SECTION 5.2. ADVANCEMENT OF EXPENSES TO DIRECTORS, OFFICERS
AND EMPLOYEES. Expenses incurred by such a director,
officer or employee in defending a civil or criminal action,
suit or proceeding shall be paid by the
<PAGE>
Company in advance of the final disposition of such action,
suit or proceeding to the fullest extent permitted under the
laws of the State of Illinois and any other applicable laws,
as they now exist or as they may be amended in the future.
SECTION 5.3. INDEMNIFICATION AND ADVANCEMENT OF EXPENSES TO
AGENTS. The board of directors may, by resolution, extend
the provisions of this Article V regarding indemnification
and the advancement of expenses to any person who was or is
a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding
by reason of the fact he or she is or was an agent of the
Company or is or was serving at the request of the Company
as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise.
SECTION 5.4. RIGHTS NOT EXCLUSIVE. The rights provided by
or granted under this Article V are not exclusive of any
other rights to which those seeking indemnification or
advancement of expenses may be entitled.
SECTION 5.5. CONTINUING RIGHTS. The indemnification and
advancement of expenses provided by or granted under this
Article V shall continue as to a person who has ceased to be
a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of
that person.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal
of the Company this 9th day of December, 1994.
/s/ FRED J. RUDOW
------------------------------
Assistant Secretary
<PAGE>
EXHIBIT 3(d)
BY-LAWS
OF
PEOPLES ENERGY CORPORATION
AMENDED DECEMBER 7, 1994
<PAGE>
PEOPLES ENERGY CORPORATION
BY-LAWS
ARTICLE I - OFFICES
ARTICLE II - MEETINGS OF SHAREHOLDERS
ARTICLE III - DIRECTORS AND COMMITTEES
ARTICLE IV - OFFICERS
ARTICLE V - INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS
ARTICLE VI - CERTIFICATES OF STOCK AND THEIR
TRANSFER
ARTICLE VII - MISCELLANEOUS (CONTRACTS)
ARTICLE VIII - AMENDMENT OR REPEAL OF BY-LAWS
<PAGE>
PEOPLES ENERGY CORPORATION
--------------------------
INDEX
PAGE
----
A
Amendment of By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . 15
Appointment of Officers. . . . . . . . . . . . . . . . . . . . . . . . 8
Assistant Controller, Duties of. . . . . . . . . . . . . . . . . . . . 11
Assistant General Counsel, Duties of . . . . . . . . . . . . . . . . . 11
Assistant Secretary, Duties of . . . . . . . . . . . . . . . . . . . . 11
Assistant Treasurer, Duties of . . . . . . . . . . . . . . . . . . . . 11
Assistant Vice President, Duties of. . . . . . . . . . . . . . . . . . 9
B
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . 4
C
Certificates of Stock and Their Transfer . . . . . . . . . . . . . . . 13
Chairman of the Board, Duties of . . . . . . . . . . . . . . . . . . . 8
Chairman of the Executive Committee. . . . . . . . . . . . . . . . . . 6
Committees
Executive. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Controller, Duties of. . . . . . . . . . . . . . . . . . . . . . . . . 10
Contracts, Execution of. . . . . . . . . . . . . . . . . . . . . . . . 15
D
Directors and Committees . . . . . . . . . . . . . . . . . . . . . . . 4
E
Election of Directors. . . . . . . . . . . . . . . . . . . . . . . . . 4
Election of Officers . . . . . . . . . . . . . . . . . . . . . . . . . 7
Executive Committee. . . . . . . . . . . . . . . . . . . . . . . . . . 6
F
Fees and Compensation. . . . . . . . . . . . . . . . . . . . . . . . . 7
<PAGE>
PEOPLES ENERGY CORPORATION
PAGE
----
G
General Counsel, Duties of . . . . . . . . . . . . . . . . . . . . . . 11
I
Indemnification of Directors, Officers, Employees
and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
M
Meetings
Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Action Without Meeting . . . . . . . . . . . . . . . . . . . . . . 6
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
N
Notice of Meetings
Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
O
Officers
Appointed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Elected. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Offices, Two or More Held By One Person. . . . . . . . . . . . . . . . 7
P
President, Duties of . . . . . . . . . . . . . . . . . . . . . . . . . 9
Presiding Officer
Board Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Shareholders Meetings. . . . . . . . . . . . . . . . . . . . . . . . 3
Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Q
Quorum
Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
<PAGE>
PEOPLES ENERGY CORPORATION
--------------------------
PAGE
----
S
Secretary, Duties of . . . . . . . . . . . . . . . . . . . . . . . . . 9
Signatures to Checks, Drafts, etc. . . . . . . . . . . . . . . . . . . 15
Stock, Certificates of and their Transfer. . . . . . . . . . . . . . . 13
T
Treasurer, Duties. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
V
Vice President, Duties of. . . . . . . . . . . . . . . . . . . . . . . 9
Voting
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Stock Owned by Company . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
BY-LAWS
OF
PEOPLES ENERGY CORPORATION
ARTICLE I
OFFICES
SECTION 1.1. PRINCIPAL OFFICE. The principal office of the Company
shall be in the City of Chicago, County of Cook and State of Illinois.
SECTION 1.2. OTHER OFFICES. The Company may also have offices at
such other places both within and without the State of Illinois as the Board of
Directors may from time to time determine or the business of the Company may
require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 2.1. ANNUAL MEETING. The annual meeting of the shareholders
shall be held on the fourth Friday of the month of February in each year, if not
a legal holiday, or, if a legal holiday, then on the next succeeding business
day, for the purpose of electing directors and for the transaction of such other
business as may come before the meeting. If the election of directors shall not
be held on the day herein designated for the annual meeting, or at any
adjournment thereof, the Board of Directors shall cause such election to be held
at a special meeting of the shareholders as soon thereafter as convenient.
SECTION 2.2. SPECIAL MEETINGS. Except as otherwise prescribed by
statute, special meetings of the shareholders for any purpose or purposes, may
be
<PAGE>
-2-
called by the Chairman of the Board, the Vice Chairman of the Executive
Committee, the Executive Committee or the President. Such request shall state
the purpose or purposes of the proposed meeting.
SECTION 2.3. PLACE OF MEETINGS. Each meeting of the shareholders
for the election of the directors shall be held at the principal office of the
Company in the City of Chicago, Illinois, unless the Board of Directors shall by
resolution designate another place as the place of such meeting. Meetings of
shareholders for any other purpose may be held at such place, and at such time
as shall be determined by the Chairman of the Board, or the President, or in
their absence, by the Secretary, and stated in the notice of the meeting or in a
duly executed waiver of notice thereof.
SECTION 2.4. NOTICE OF MEETINGS. Written or printed notice stating
the place, date and hour of each annual or special meeting of the shareholders,
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called, shall be given not less than 10 or more than 60 days before
the date of the meeting, except as otherwise provided by statute. Notice of any
meeting of the shareholders may be waived by any shareholder.
SECTION 2.5. QUORUM. The holders of a majority of the shares issued
and outstanding and entitled to vote thereat, present in person or represented
by proxy, shall be requisite for, and shall constitute, a quorum at all meetings
of the shareholders of the Company for the transaction of business, except as
otherwise provided by statute or these by-laws. If a quorum shall not be
present or represented at any meeting of the shareholders, the shareholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time
<PAGE>
-3-
to time, without notice other than announcement at the meeting if the
adjournment is for thirty days or less or unless after that adjournment a new
record date is fixed, until a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed.
SECTION 2.6. PROXIES. At every meeting of the shareholders, each
shareholder having the right to vote thereat shall be entitled to vote in person
or by proxy. Such proxy shall be appointed by an instrument in writing
subscribed by such shareholder and bearing a date not more than eleven months
prior to such meeting, unless such proxy provides for a longer period, and shall
be filed with the Secretary of the Company before, or at the time of, the
meeting.
SECTION 2.7. VOTING. At each meeting of the shareholders, each
shareholder shall be entitled to one vote for each share of stock entitled to
vote thereat which is registered in the name of such shareholder on the books of
the Company. At all elections of directors of the Company, the holders of
shares of stock of the Company shall be entitled to cumulative voting. When a
quorum is present at any meeting of the shareholders, the vote of the holders of
a majority of the shares present in person or represented by proxy and entitled
to vote at the meeting shall be sufficient for the transaction of any business,
unless otherwise provided by statute, the Articles of Incorporation or these by-
laws.
SECTION 2.8. PRESIDING OFFICER. The presiding officer of any
meeting of the shareholders shall be the Chairman of the Board or, in the case
of the absence of the Chairman of the Board, the President.
<PAGE>
-4-
ARTICLE III
DIRECTORS AND COMMITTEES
SECTION 3.1. NUMBER AND ELECTION. The business and affairs of the
Company shall be managed and controlled by a Board of Directors, eleven (11) in
number, none of whom need to be a shareholder, which number may be altered from
time to time by amendment of these by-laws, but shall never be less than three
(3). Except as provided in the Articles of Incorporation, the directors shall
be elected by the shareholders entitled to vote at the annual meeting of such
shareholders and each director shall be elected to serve for a term of one (1)
year and thereafter until his successor shall be elected and shall qualify.
SECTION 3.2. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held immediately, or as soon as practicable, after the annual
meeting of the shareholders in each year for the purpose of electing officers
and for the transaction of such other business as may be deemed necessary, and
regular meetings of the Board shall be held at such date and time and at such
place as the Board of Directors may from time to time determine. Not less than
two days' notice of all regular meetings of the Board, except the meeting to be
held after the annual meeting of shareholders which shall be held without other
notice than this by-law, shall be given to each director personally or by mail
or telegram.
SECTION 3.3. SPECIAL MEETINGS. Special meetings of the Board may be
called at any time by the Chairman of the Board, the President, or by any two
directors, by causing the Secretary to mail to each director, not less than
three days
<PAGE>
-5-
before the time of such meeting, a written notice stating the time and place of
such meeting. Notice of any meeting of the Board may be waived by any director.
SECTION 3.4. QUORUM. At each meeting of the Board of Directors, the
presence of not less than a majority of the total number of directors specified
in Section 3.l hereof shall be necessary and sufficient to constitute a quorum
for the transaction of business, and the act of a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors, except as may be otherwise specifically provided by statute. If a
quorum shall not be present at any meeting of directors, the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present. In determining
the presence of a quorum at a meeting of the directors or a committee thereof
for the purpose of authorizing a contract or transaction between the Company and
one or more of its directors, or between the Company and any other corporation,
partnership, association, or other organization in which one or more of the
directors of this Company are directors or officers, or have a financial
interest in such other organization, such interested director or directors may
be counted in determining a quorum.
SECTION 3.5. PRESIDING OFFICER. The presiding officer of any
meeting of the Board of Directors shall be the Chairman of the Board. In the
case of the absence of the Chairman of the Board, for reasons other than
provided in Section 4.3, the President shall act in his place and stead. In the
case of the temporary absence of both the Chairman of the Board and the
President, the Vice Chairman of the
<PAGE>
-6-
Executive Committee or, in his absence, any other director elected by vote of a
majority of the directors present at the meeting, shall act as chairman of the
meeting.
SECTION 3.6. EXECUTIVE COMMITTEE. The Executive Committee of the
Board of Directors shall consist of the Chairman of the Board who shall be the
Chairman of the Executive Committee, and each of the nonmanagement directors.
The Chairman of the Board shall select a Vice Chairman of the Executive
Committee subject to the approval of the Board of Directors of the Company. The
Executive Committee shall, in the recess of the Board, have all the powers of
the Board except those powers which, under the law of the State of Illinois, may
not be exercised by such Committee and shall keep a record of its proceedings
and report the same to the Board. The Executive Committee may meet at any place
whenever required by a member of the Committee and may act by the consent of a
majority of its members, although not formally convened.
SECTION 3.7. OTHER COMMITTEES. The Board may appoint other
committees, standing or special, from time to time from among its own members or
otherwise, and may confer such powers on such committees as the Board may
determine and may revoke such powers and terminate the existence of such
committees at its pleasure.
SECTION 3.8. ACTION WITHOUT MEETING. Any action required or
permitted to be taken at any meeting of the Board of Directors, or any committee
thereof, may be taken without a meeting if all members of the Board or of such
committee, as the case may be, consent thereto in writing and such writing or
writings are filed with the minutes of the proceedings of the Board or such
committee.
<PAGE>
-7-
SECTION 3.9. FEES AND COMPENSATION OF DIRECTORS. Directors shall
not receive any stated salary for their services as such; but, by resolution of
the Board of Directors, reasonable fees, with or without expenses of attendance,
may be allowed. Members of the Board shall be allowed their reasonable
traveling expenses when actually engaged in the business of the Company, to be
audited and allowed as in other cases of demands against the Company. Members
of standing or special committees may be allowed fees and expenses for attending
committee meetings. Nothing herein contained shall be construed to preclude any
director from serving the Company in any other capacity and receiving
compensation therefor.
ARTICLE IV
OFFICERS
SECTION 4.1. ELECTION OF OFFICERS. There shall be elected by the
Board of Directors in each year the following officers: a Chairman of the
Board; a President; such number of Senior Vice Presidents, such number of
Executive Vice Presidents, such number of Vice Presidents and such number of
Assistant Vice Presidents as the Board at the time may decide upon; a Secretary;
such number of Assistant Secretaries as the Board at the time may decide upon; a
Treasurer; such number of Assistant Treasurers as the Board at the time may
decide upon; a Controller; and such number of Assistant Controllers as the Board
at the time may decide upon; a General Counsel; and such number of Assistant
General Counsel as the Board at the time may decide upon. Any two or more
offices may be held by one person, except that the offices of President and
Secretary may not be held by the same person. All officers shall hold their
respective offices during the pleasure of the Board.
<PAGE>
-8-
SECTION 4.2. APPOINTMENT OF OFFICERS. The Board of Directors, the
Executive Committee, the Chairman of the Board, or the President may from time
to time appoint such other officers as may be deemed necessary, including one or
more Vice Presidents, one or more Assistant Vice Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, one or more Assistant
Controllers and one or more Assistant General Counsel, and such other agents and
employees of the Company as may be deemed proper. Such officers, agents and
employees shall have such authority, perform such duties and receive such
compensation as the Board of Directors, the Executive Committee or, in the case
of appointments made by the Chairman of the Board or the President, as the
Chairman of the Board or the President, may from time to time prescribe and
determine. The Board of Directors or the Executive Committee may from time to
time authorize any officer to appoint and remove agents and employees, to
prescribe their powers and duties and to fix their compensation therefor.
SECTION 4.3. DUTIES OF CHAIRMAN OF THE BOARD. The Chairman of the
Board shall be the chief executive officer of the Company and shall have control
and direction of the management and affairs of the Company and may execute all
contracts, deeds, assignments, certificates, bonds or other obligations for and
on behalf of the Company, and sign certificates of stock and records of
certificates required by law to be signed by the Chairman of the Board. When
present, the Chairman of the Board shall preside at all meetings of the Board
and of the shareholders. In the absence of the Chairman of the Board, due to
his permanent disability, death, resignation or removal from office, the Vice
Chairman of the Executive Committee shall promptly convene the
<PAGE>
-9-
Executive Committee to select a nominee for that office and submit said
nominee's name to the Board of Directors for their consideration.
SECTION 4.4. DUTIES OF PRESIDENT. Subject to the Control and
direction of the Chairman of the Board, and to the control of the Board, the
President shall have general management of all the business of the Company, and
he shall have such other powers and perform such other duties as may be
prescribed for him by the Board or be delegated to him by the Chairman of the
Board. He shall possess the same power as the Chairman of the Board to sign all
certificates, contracts and other instruments of the Company. In case of the
absence or disability of the President, or in case of his death, resignation or
removal from office, the powers and duties of the President shall devolve upon
the Chairman of the Board during absence or disability, or until the vacancy in
the office of President shall be filled.
SECTION 4.5. DUTIES OF VICE PRESIDENT. Each of the Senior Vice
Presidents, Executive Vice Presidents, Vice Presidents and Assistant Vice
Presidents shall have such powers and duties as may be prescribed for him by the
Board, or be delegated to him by the Chairman of the Board or by the President.
Each of such officers shall possess the same power as the President to sign all
certificates, contracts and other instruments of the Company.
SECTION 4.6. DUTIES OF SECRETARY. The Secretary shall have the
custody and care of the corporate seal, records and minute books of the Company.
He shall attend the meetings of the Board, of the Executive Committee, and of
the shareholders, and duly record and keep the minutes of the proceedings, and
file and take charge of all papers and documents belonging to the general files
of the Company, and shall
<PAGE>
-10-
have such other powers and duties as are commonly incident to the office of
Secretary or as may be prescribed for him by the Board, or be delegated to him
by the Chairman of the Board or by the President.
SECTION 4.7. DUTIES OF TREASURER. The Treasurer shall have charge
of, and be responsible for, the collection, receipt, custody and disbursement of
the funds of the Company, and shall deposit its funds in the name of the Company
in such banks, trust companies or safety deposit vaults as the Board may direct.
He shall have the custody of the stock record books and such other books and
papers as in the practical business operations of the Company shall naturally
belong in the office or custody of the Treasurer, or as shall be placed in his
custody by the Board, the Chairman of the Board, the President, or any Vice
President, and shall have such other powers and duties as are commonly incident
to the office of Treasurer, or as may be prescribed for him by the Board, or be
delegated to him by the Chairman of the Board or by the President.
SECTION 4.8. DUTIES OF CONTROLLER. The Controller shall have
control over all accounting records pertaining to moneys, properties, materials
and supplies of the Company. He shall have Charge of the bookkeeping and
accounting records and functions, the related accounting information systems and
reports and executive supervision of the system of internal accounting controls,
and such other powers and duties as are commonly incident to the office of
Controller or as may be prescribed by the Board, or be delegated to him by the
Chairman of the Board or by the President.
SECTION 4.9. DUTIES OF GENERAL COUNSEL. The General Counsel shall
have full responsibility for all legal advice, counsel and services for the
Company and
<PAGE>
-11-
its subsidiaries including employment and retaining of attorneys and law firms
as shall in his discretion be necessary or desirable and shall have such other
powers and shall perform such other duties as from time to time may be assigned
to him by the Board, the Chairman of the Board or the President.
SECTION 4.10. DUTIES OF ASSISTANT SECRETARY, ASSISTANT TREASURER,
ASSISTANT CONTROLLER AND ASSISTANT GENERAL COUNSEL. The Assistant Secretary,
Assistant Treasurer, Assistant Controller and Assistant General Counsel shall
assist the Secretary, Treasurer, Controller, and General Counsel, respectively,
in the performance of the duties assigned to each and shall for such purpose
have the same powers as his principal. He shall also have such other powers and
duties as may be prescribed for him by the Board, or be delegated to him by the
Chairman of the Board or by the President.
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
SECTION 5.1. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES.
The Company shall indemnify, to the fullest extent permitted under the laws of
the State of Illinois and any other applicable laws, as they now exist or as
they may be amended in the future, any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(including, without limitation, an action by or in the right of the Company), by
reason of the fact that he or she is or was a director, officer or employee of
the Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
<PAGE>
-12-
trust, employee benefit plan or other enterprise against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding.
SECTION 5.2. ADVANCEMENT OF EXPENSES TO DIRECTORS, OFFICERS AND
EMPLOYEES. Expenses incurred by such a director, officer or employee in
defending a civil or criminal action, suit or proceeding shall be paid by the
Company in advance of the final disposition of such action, suit or proceeding
to the fullest extent permitted under the laws of the State of Illinois and any
other applicable laws, as they now exist or as they may be amended in the
future.
SECTION 5.3. INDEMNIFICATION AND ADVANCEMENT OF EXPENSES TO AGENTS.
The board of directors may, by resolution, extend the provisions of this Article
V regarding indemnification and the advancement of expenses to any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding by reason of the fact he or she is or
was an agent of the Company or is or was serving at the request of the Company
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise.
SECTION 5.4. RIGHTS NOT EXCLUSIVE. The rights provided by or granted
under this Article V are not exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled.
SECTION 5.5. CONTINUING RIGHTS. The indemnification and advancement
of expenses provided by or granted under this Article V shall continue as to a
person
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who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of that person.
ARTICLE VI
CERTIFICATES OF STOCK AND THEIR TRANSFER
SECTION 6.1. CERTIFICATES OF STOCK. The certificates of stock of
the Company shall be in such form as may be determined by the Board of
Directors, shall be numbered and shall be entered in the books of the Company as
they are issued. They shall exhibit the holder's name and number of shares and
shall be signed by the Chairman of the Board, the President or a Vice President
and also by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary and shall bear the corporate seal or a facsimile thereof.
If a certificate is countersigned by a transfer agent or registrar, other than
the Company itself or its employee, any other signature or countersignature on
the certificate may be facsimiles. In case any officer of the Company, or any
officer or employee of the transfer agent or registrar, who has signed or whose
facsimile signature has been placed upon such certificate ceases to be an
officer of the Company, or an officer or employee of the transfer agent or
registrar, before such certificate is issued, said certificate may be issued
with the same effect as if the officer of the Company, or the officer or
employee of the transfer agent or registrar, had not ceased to be such at the
date of issue.
SECTION 6.2. TRANSFER OF STOCK. Upon surrender to the Company of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, and upon payment of applicable
taxes with respect to such transfer, it shall be the duty of the Company,
subject to such rules and
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regulations as the Board of Directors may from time to time deem advisable
concerning the transfer and registration of certificates for shares of stock of
the Company, to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
SECTION 6.3. SHAREHOLDERS OF RECORD. The Company shall be entitled
to treat the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part or any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by statute.
SECTION 6.4. LOST, DESTROYED OR STOLEN CERTIFICATES. The Board of
Directors, in individual cases or by general resolution, may direct a new
certificate or certificates to be issued by the Company as a replacement for a
certificate or certificates for a like number of shares alleged to have been
lost, destroyed or stolen, upon the making of an affidavit of that fact by the
person claiming the certificate or certificates of stock to be lost, destroyed
or stolen. When authorizing such issue of a new certificate or certificates,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, destroyed or stolen
certificate or certificates, or his legal representative, to give the Company a
bond in such form and amount as it may direct as indemnity against any claim
that may be made against the Company with respect to the certificate or
certificates alleged to have been lost, destroyed or stolen.
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ARTICLE VII
MISCELLANEOUS
SECTION 7.1. CONTRACTS AND OTHER INSTRUMENTS. All contracts or
obligations of the Company shall be in writing and shall be signed either by the
Chairman of the Board, the President, or any Vice President and, unless the
Board shall otherwise determine and direct, the seal of the Company shall be
attached thereto, duly attested by the Secretary or an Assistant Secretary,
except contracts entered into in the ordinary course of business where the
amount involved is less than One Hundred Thousand Dollars ($100,000), and except
contracts for the employment of servants or agents, which contracts so excepted
may be entered into by the Chairman of the Board, the President, any Vice
President, or by such officers or agents as the Chairman of the Board or the
President may designate and authorize. Unless the Board shall otherwise
determine and direct, all checks or drafts and all promissory notes shall be
signed by two officers of the Company. When prescribed by the Board, bonds,
promissory notes, and other obligations of the Company may bear the facsimile
signature of the officer who is authorized to sign such instruments and,
likewise, may bear the facsimile signature of the Secretary or an Assistant
Secretary.
SECTION 7.2. VOTING STOCK OWNED BY COMPANY. Any or all shares owned
by the Company in any other corporation, and any or all voting trust
certificates owned by the Company calling for or representing shares of stock of
any other corporation, may be voted by the Chairman of the Board, the President,
any Vice President, the Secretary or the Treasurer, either in person or by
written proxy given to any person in the name of the Company at any meeting of
the shareholders of such
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corporation, or at any meeting of voting trust certificate holders, upon any
question that may be presented at any such meeting. Any such officer, or anyone
so representing him by written proxy, may on behalf of the Company waive any
notice of any such meeting required by any statute or by-law and consent to the
holding of such meeting without notice.
ARTICLE VIII
AMENDMENT OR REPEAL OF BY-LAWS
These by-laws may be added to, amended or repealed at any regular or
special meeting of the Board by a vote of a majority of the membership of the
Board.
<PAGE>
EXHIBIT 10(a)
PEOPLES ENERGY CORPORATION
SHORT-TERM INCENTIVE COMPENSATION PLAN
Effective October 1, 1992
(Amended December 2, 1992 and December 7, 1994)
ARTICLE 1. ESTABLISHMENT AND PURPOSES
1.1 ESTABLISHMENT OF THE PLAN. Peoples Energy Corporation, an
Illinois corporation, hereby establishes an annual incentive compensation
plan to be known as the "Peoples Energy Corporation Short-Term Incentive
Compensation Plan", as set forth in this document. The Plan permits the
awarding of annual cash bonuses to Employes of the Company, based on levels
of achievement under preestablished performance measures.
The Plan shall become effective as October 1, 1992 and shall remain in
effect until terminated by the Board.
1.2 PURPOSES. The purposes of the Plan are as follows:
(a) To provide to Participants meaningful incentives that will
benefit shareholders and customers through improvement in performance in
areas of strategic concern to the Company;
(b) To provide competitive levels of compensation to enable the
Company to attract and retain people who are able to make a significant
contribution to the Company's success; and
(c) To encourage teamwork and cooperation in the achievement of
Company goals.
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ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings
set forth below and, when the defined meaning is intended, the terms is
capitalized:
(a) "Award Opportunity" means the various levels of incentive
award payouts which a Participant may earn under the Plan,
as established by the Committee pursuant to Section 5.2
herein.
(b) "Board" or "Board of Directors" means the Board of Directors
of Peoples Energy Corporation.
(c) "Cause" shall mean the occurrence of any one or more of the
following:
(i) The willful and continued failure by a Participant to
perform substantially his or her duties (other than any
such failure resulting from the Participant's
disability), after a written demand for substantial
performance is delivered to the Participant that
specifically identifies the manner in which the Company
believes that the Participant has not substantially
performed his or her duties, and the Participant has
failed to remedy the situation within ten (10) business
days after receiving such notice; or
(ii) The Participant's conviction for committing a felony;
or
(iii) The willful engaging by the Participant in gross
misconduct materially and demonstrably injurious to the
Company.
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However, no act, or failure to act, on the
Participant's part shall be considered "willful" unless
done, or omitted to be done, by the Participant not in
good faith and without reasonable belief that his or
her action or omission was in the best interest of the
Company.
(d) "Change in Control" shall be deemed to have occurred if any
one of the following events has occurred:
(i) Twenty percent (20%) or more of Peoples' outstanding
shares of common stock have been acquired by any Person
other than directly from Peoples; or
(ii) There has been a merger or equivalent combination after
which forty-nine percent (49%) or more of the voting
stock of the surviving corporation is held by Persons
other than former stockholders of Peoples; or
(iii) Twenty percent (20%) or more of the directors elected
by stockholders to the Board of Directors are Persons
who were not nominated by management in the most recent
proxy statement of Peoples; or
(iv) the stockholders of Peoples approve: (A) a plan of
complete liquidation of Peoples or (B) an agreement for
the sale or disposition of all or substantially all of
Peoples' assets.
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However, in no event shall a Change in Control be deemed to have
occurred, with respect to a Participant, if the Participant is
part of a purchasing group which consummates the Change in
Control transaction. A Participant shall be deemed "part of a
purchasing group" for purpose of the preceding sentence if the
Participant is an equity participant or has agreed to become an
equity participant in the purchasing company or group, except
for: (A) passive ownership of less than five percent (5%) of the
voting common stock of the purchasing company; or (B) ownership
of equity participation in the purchasing company or group which
is otherwise not deemed to be significant, as determined prior to
the Change in Control by a majority of the non-employee
continuing directors.
(e) "Committee" means the Compensation-Nominating Committee of
the Board.
(f) "Company" means Peoples Energy Corporation, an Illinois
corporation (including any and all Subsidiaries), and any
successor thereto.
(g) "Computed Award Amount" means the amount of an award to a
Participant, computed at the end of the Plan Year on the
basis of levels of achievement under the preestablished
corporate, divisional and/or individual measures.
(h) "Effective Date" means October 1, 1992.
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(i) "Employee" means a full-time, salaried employee of the
Company who occupies a position in an officer salary grade.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor act thereto.
(k) "Final Award" means, with respect to the Chief Executive
Officer, the actual award earned during a Plan Year by a
Participant, as determined by the Committee, subject to the
approval of the majority of the Outside Directors and, with
respect to all other Participants, the actual award earned
during a Plan Year by a Participant, as determined by the
Committee at the end of the Plan Year.
(l) "Outside Directors" means all members of the Board who are
not employees or officers of the Company.
(m) "Participant" means an Employee who is actively
participating in the Plan as determined by the Committee
under Article 4 herein.
(n) "Peoples" means Peoples Energy Corporation.
(o) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections
13(d) and 14(d) thereof, including a "group" as defined in
Section 13(d).
(p) "Plan" means the Peoples Energy Corporation Short-Term
Incentive Compensation Plan.
(q) "Plan Year" means Peoples Energy Corporation's fiscal year.
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(r) "Subsidiary" means any corporation more than 50 percent of
the total combined voting power of which is owned by Peoples
or by another corporation qualifying as a Subsidiary within
this definition, or by a combination of any of them.
ARTICLE 3. ADMINISTRATION
3.1 THE COMMITTEE. The Plan shall be administered by the Committee
in accordance with rules that it may establish from time to time, that are
not inconsistent with the provisions of the Plan.
3.2 DECISIONS BINDING. All determinations and decisions of the
Committee as to any disputed question arising under the Plan, including
questions of construction and interpretation, shall be final, binding, and
conclusive upon all parties. All determinations and decisions as to any
disputed question concerning the Final Award for the Chief Executive
Officer shall be made by the Committee, subject to the approval of the
majority of the Outside Directors, which determinations and decisions shall
be final, binding, and conclusive upon all parties.
3.3 INDEMNIFICATION. Each person who is or shall have been a member
of the Committee or of the Board, shall be indemnified and held harmless by
the Company against and from any loss, cost, liability, or expense that may
be imposed upon or reasonably incurred by him or her in connection with or
resulting from any claim, action, suit, or proceeding to which he or she
may be a party, or in which he or she may be involved by reason of any
action taken or failure to act under the Plan, and against and
<PAGE>
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from any and all amounts paid by him or her in settlement thereof, with the
Company's approval, or paid by him or her in satisfaction of any judgment
in any such action, suit, or proceeding against him or her, provided he or
she shall give the Company an opportunity, at its own expense, to handle
and defend the same before he or she undertakes to handle and defend it on
his or her own behalf.
The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such person may be entitled under
the Company's Certificate of Incorporation or Bylaws, as a matter of law,
or otherwise, or any power that the Company may have to indemnify such
person or hold such person harmless.
ARTICLE 4. ELIGIBILITY AND PARTICIPATION
4.1 ELIGIBILITY. All Employees (as defined in Article 2 herein) who
are actively employed by the Company prior to April 1 of any Plan Year
shall be eligible to participate in the Plan for such Plan Year.
4.2 PARTICIPATION. Participation in the Plan shall be determined
annually by the Committee based upon the criteria set forth in Section 4.1
herein. Employees who are to be Participants in the Plan for a Plan Year
shall be so notified in writing, and shall be apprised of the performance
measures and related award opportunities for the Plan Year, at the
beginning of the Plan Year or as soon as is practicable.
4.3 PARTIAL PLAN YEAR PARTICIPATION. In the event that an Employee
becomes eligible to participate in the Plan subsequent to the commencement
of a Plan Year, but prior to April 1 of such Plan Year, then such
Employee's Final Award shall be prorated
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based upon the number of full weeks of employment with the Company during
such Plan Year. Except with respect to the Final Award for the Chief
Executive Officer, the Committee shall have full discretion to determine
the proper calculation for such proration. The Committee shall have
discretion to determine the proper calculation for such proration in the
case of the Final Award for the Chief Executive Officer, subject to the
approval of the majority of the Outside Directors.
4.4 NO RIGHT TO PARTICIPATE. No Participant or other Employee shall
at any time have a right to be selected for participation in the Plan for
any Plan Year, despite having previously participated in the Plan.
ARTICLE 5. AWARD DETERMINATION
5.1 PERFORMANCE MEASURES. Prior to the beginning of each Plan Year,
or as soon as practicable thereafter, the Committee shall establish
performance measures for that Plan Year. The performance measures may be
based on any combination of corporate, divisional, and/or individual
measures. After the performance measures are established, the Committee
will align the achievement of performance levels with the Award
Opportunities (as described in Section 5.2 herein), such that the levels of
achievement under the preestablished performance measures at the end of the
Plan Year will determine the Final Award amounts, subject to the
Committee's exercising subjective discretion in the determination of Final
Awards for all Participants other than the Chief Executive Officer and the
Committee exercising subjective discretion in the determination of the
Final Award for the Chief Executive Officer, subject to the approval
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of the majority of the Outside Directors. The Chief Executive Officer
shall have the responsibility for the designation and evaluation of
divisional and/or individual performance measures, subject to the
Committee's determination of Final Award amounts.
The Committee also may establish one or more Company-wide performance
measures which must be achieved for any Participant to receive an award for
that Plan Year.
5.2 AWARD OPPORTUNITIES. Prior to the beginning of each Plan Year,
or as soon as practicable thereafter, the Committee shall establish an
Award Opportunity for each Participant. The established Award
Opportunities for a Plan Year may vary in relation to the job
classifications of Participants. In the event a Participant changes job
levels during a Plan Year, the Participant's Award Opportunity may be
adjusted to reflect the amount of time at each job level during the Plan
Year.
5.3 ADJUSTMENT OF PERFORMANCE MEASURES. The Committee shall have the
right to adjust the performance measures, including Company-wide
performance measures, and the Award Opportunities (either up or down)
during a Plan Year if it determines that external changes or other
unanticipated business conditions have materially affected the
appropriateness of the measures or have unduly influenced the Company's or
the Participant's ability to meet levels of achievement under the measures.
Further, in the event of a Plan Year of less than twelve (12) months, the
Committee shall have the right to adjust the performance measures and the
Award Opportunities accordingly, at its discretion.
<PAGE>
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5.4 FINAL AWARD DETERMINATIONS. At the end of each Plan Year, a
Final Award shall be computed by the Committee for the Chief Executive
Officer, subject to the approval of the majority of the Outside Directors,
and solely by the Committee for all other Participants. The Final Award
for the Chief Executive Officer may vary above or below the Computed Award
Amount at the discretion of the Committee, subject to the approval of the
majority of the Outside Directors. The Final Award for all other
Participants may vary above or below the Computed Award Amount at the sole
discretion of the Committee.
5.5 AWARD CAP. The Committee may establish guidelines governing the
maximum Final Awards that may be earned by Participants (either in the
aggregate, by Employee class, or among individual Participants) in each
Plan Year. The guidelines may be expressed as a percentage of corporate-
wide goals or financial measures, or such other measures as the Committee
shall from time to time determine.
ARTICLE 6. PAYMENT OF FINAL AWARDS
6.1 FORM AND TIMING OF PAYMENT. Except as set forth in Section 6.3
herein, each Final Award payment shall be paid in cash, in one lump sum,
within seventy-five (75) calendar days after the end of each Plan Year.
6.2 UNSECURED INTEREST. No Participant or any other party claiming
an interest in amounts earned under the Plan shall have any interest
whatsoever in any specific asset of the Company. To the extent that any
party acquires a right to receive
<PAGE>
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payments under the Plan, such right shall be equivalent to that of an
unsecured general creditor of the Company.
6.3 DEFERRAL. The Committee may in its discretion provide for the
voluntary deferral by Participants of any payment or portion thereof of a
Final Award. In the event the Committee provides for deferral, it shall
also provide for accrual and payment of interest on amounts so deferred.
ARTICLE 7. TERMINATION OF EMPLOYMENT
7.1 TERMINATION OF EMPLOYMENT DUE TO DEATH OR RETIREMENT. In the
event a Participant's employment is terminated by reason of death or
retirement, the Final Award determined in accordance with Section 5.4
herein, shall be reduced to reflect only participation prior to
termination. The reduced award shall be determined by multiplying said
Final Award by a fraction; the numerator of which is the number of full
weeks of employment in the Plan Year through the date of employment
termination, and the denominator of which is fifty-two (52).
The Final Award thus determined shall be paid within seventy-five (75)
calendar days following the end of the Plan Year in which employment
termination occurred.
7.2 TERMINATION OF EMPLOYMENT DUE TO DISABILITY. In the event a
Participant's employment is terminated by reason of disability (as
determined in the sole discretion of the Committee), the Committee, in its
sole discretion, may either: (A) pay the Final Award determined in
accordance with Section 5.4 herein without reduction or (B) pay a reduced
amount of the Final Award, computed as determined by the Committee. Any
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determination under this Section 7.2 regarding the Chief Executive Officer
shall be made by the Committee, subject to the approval of the majority of
the Outside Directors.
7.3 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. In the event a
Participant's employment is terminated for any reason other than death,
disability, or retirement (as determined in the sole discretion of the
Committee), all of the Participant's rights to a Final Award for the Plan
Year then in progress shall be forfeited. However, except in the event of
an employment termination for Cause, the Committee, in its sole discretion,
may pay a prorated award for the portion of that Plan Year that the
Participant was employed by the Company, computed as determined by the
Committee. Any determination under this Section 7.3 regarding the Chief
Executive Officer shall be made by the Committee, subject to the approval
of the majority of the Outside Directors.
ARTICLE 8. RIGHTS OF PARTICIPANTS
8.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit in
any way the right of the Company to terminate any Participant's employment
at any time, nor confer upon any Participant any right to continue in the
employ of the Company.
8.2 NON-TRANSFERABILITY. No right or interest of any Participant in
the Plan shall be assignable or transferable, or subject to any lien,
directly, by operation of law, or otherwise, including, but not limited to,
execution, levy, garnishment, attachment, pledge, and bankruptcy.
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8.3 EFFECT OF AWARD ON EMPLOYEE BENEFITS. Except as is expressly set
forth in any employee benefit plan of the Company, payment of an award to a
Participant under the Plan is special additional compensation and shall not
have any effect upon any of the Participant's employee benefits.
ARTICLE 9. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or
successively) to whom any benefit under the Plan is to be paid in case of
his or her death before he or she receives any or all of such benefit.
Each designation will revoke all prior designations by the same
Participant, shall be in a form prescribed by the Committee, and will be
effective only upon receipt by the Secretary of Peoples or a written notice
given by the Participant during the Participant's lifetime. In the absence
of any such designation, benefits remaining unpaid at the Participant's
death shall be paid to the Participant's estate.
ARTICLE 10. CHANGE IN CONTROL
10.1 CONTINUATION OF PLAN AND PARTICIPATION. In the event that
following a Change in Control, the Plan and the employment of a majority of
the Participants continue without interruption throughout the entire Plan
Year in which the Change in Control occurred, the provisions of the Plan,
as set forth herein shall govern.
10.2 OTHER EVENTS. In the event of a Change in Control, together with
the occurrence of any of the following within the Plan Year in which the
Change in Control
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occurs: (i) a discontinuation of the Plan; (ii) the termination of the
employment of a majority of the Participants who were Employes immediately
prior to the Change in Control; or (iii) restructuring or accounting
charges occurring incident to the Change in Control make the sizes of Final
Awards inconsistent with the Final Award sizes contemplated by the
Committee at the beginning of the Plan Year, then each Participant shall be
entitled to payment of an amount equal to the amount of his or her Computed
Award Amount for the Plan Year during which such Change in Control occurs.
Such amount shall be paid in cash to each Participant promptly following
the earlier to occur of: (i) any discontinuance of the Plan during a Plan
Year in which a Change in Control occurs; or (ii) seventy-five (75) days
after the end of the Plan Year in which the Change in Control occurs.
ARTICLE 11. AMENDMENTS
The Board of Directors, in its sole discretion, without notice, at any
time and from time to time, may modify or amend, in whole or in part, any
or all of the provisions of the Plan, or suspend or terminate it entirely;
provided, however, that no such modification, amendment, suspension, or
termination may, without the consent of a Participant (or his or her
beneficiary in the case of the death of the Participant), reduce the right
of a Participant (or his or her beneficiary as the case may be) to a
payment or distribution hereunder to which he or she is entitled.
<PAGE>
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ARTICLE 12. MISCELLANEOUS
12.1 GOVERNING LAW. The Plan, and all agreements hereunder, shall be
governed by and construed in accordance with the laws of the state of
Illinois.
12.2 WITHHOLDING TAXES. The Company shall have the right to deduct
from all payments under the Plan any Federal, state, or local taxes
required by law to be withheld with respect to such payments.
12.3 GENDER AND NUMBER. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine;
the plural shall include the singular, and the singular shall include the
plural.
12.4 SEVERABILITY. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining parts of the Plan, and the Plan shall be construed
and enforced as if the illegal or invalid provision had not been included.
12.5 COSTS OF THE PLAN. All costs of implementing and administering
the Plan shall be borne by the Company.
12.6 SUCCESSORS. All obligations of the Company under the Plan shall
be binding upon and inure to the benefit of any successor to the Company,
whether the existence of such successor is the result of a director or
indirect purchase, merger, consolidation, or otherwise, of all or
substantially all of the business and/or assets of the Company.
<PAGE>
EXHIBIT 10(b)
PEOPLES ENERGY CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
SECTION 1 - PURPOSE AND INTENT:
Peoples Energy Corporation, an Illinois corporation, hereby
establishes the "Peoples Energy Corporation Executive Deferred Compensation
Plan", as set forth herein, to aid it in retaining and attracting
qualified, executive level employees by providing such employees with a
means of supplementing their standard of living at retirement or otherwise
through tax deferred savings. This plan is intended to be maintained
primarily for the purpose of providing deferred compensation for a select
group of management or highly compensated employees and is intended to
qualify for the alternative method of complying with the reporting and
disclosure requirements of the Employee Retirement Income Security Act of
1974, as amended, set forth in DOL Reg. SECTION 2520.104-23.
The Plan shall become effective October 1, 1994 with respect to
bonuses awarded under the Peoples Energy Corporation Short-Term Incentive
Compensation Plan for fiscal years of the Company ending on or after
September 30, 1995 and shall remain in effect until terminated by the
Board.
<PAGE>
SECTION 2 - DEFINITIONS:
The following terms, when used herein and initially capitalized as
indicated below, shall have the following respective meanings, unless
expressly otherwise provided or clearly required by the context:
(a) "Account" means each account established for a Participant
pursuant to Section 4.
(b) "Balance" means at any date the amount credited to a
Participant's Account upon deferral of a Bonus, plus all interest
equivalents and supplemental amounts credited to that Account through such
date, less amounts paid from the Account prior to such date.
(c) "Beneficiary" means any person who is entitled to receive
distributions under this Plan pursuant to Section 6.
(d) "Board" means the Board of Directors of the Company.
(e) "Bonus" means a bonus awarded under the Peoples Energy
Corporation Short-Term Incentive Compensation Plan as in effect on the
effective date hereof or as it may be subsequently amended, as well as any
other bonus plan maintained by the Company which the Committee determines
should be subject to the provisions of this Plan.
(f) "Committee" means the Company's Retirement and Benefit Plans
Committee or any successor committee appointed by the Board.
2
<PAGE>
(g) "Company" means Peoples Energy Corporation, an Illinois
corporation. For purposes of determining Eligible Employees, the term
Company shall be deemed to include any and all Subsidiaries.
(h) "Eligible Employee" means with respect to any Year a full-
time, salaried employee of the Company who occupies a position in an
officer salary grade, provided that such employee is also considered a
member of a select group of management or highly compensated employees for
purposes of DOL Reg. SECTION 2520.104-23.
(i) "Participant" means an Eligible Employee who has elected to
defer all or part of a Bonus under this Plan.
(j) "Plan" means the plan set forth herein and known as the
"Peoples Energy Corporation Executive Deferred Compensation Plan."
(k) "Retirement Plan" means the Peoples Energy Corporation
Retirement Plan.
(l) "Supplemental Retirement Plan" means the Peoples Energy
Corporation Supplemental Retirement Plan, Part A and Supplemental
Retirement Plan, Part B.
(m) "Subsidiary" means any corporation more than 50 percent of
the total combined voting power of which is owned by the Company or any
Subsidiary of the Company or any combination thereof.
(n) "Termination of Service" means with respect to a Participant
cessation of such Participant's employment by the Company and all
3
<PAGE>
Subsidiaries, for any reason, including termination of active service under
conditions of entitlement to deferred or immediate commencement of benefits
under the Peoples Energy Corporation Retirement Plan, total disability
resulting in the Participant being eligible to receive benefits under the
Company's Long Term Disability Benefit Plan, or death. Termination of
Service does not include the temporary cessation of employment due to
illness, disability (other than total disability as described above) or
other temporary leave of absence.
(o) "Year" means a fiscal year of the Company beginning October
1 and ending September 30.
SECTION 3 - PARTICIPATION
An Eligible Employee may irrevocably elect to defer the payment of all
or a part of a Bonus in accordance with the following requirements by
giving notice to the Company. Each notice shall include an irrevocable
election of a deferral period which shall be not less than twenty-four (24)
months nor more than two-hundred forty (240) months and which shall end on
the last day of a month. Such notice of election must be made on or before
October 30 of the fiscal year with respect to which the Bonus to be
deferred would be paid. For example, an election with respect to a Bonus
for the fiscal year ending September 30, 1995 must be made on or before
October 30, 1994. A separate notice will be required for each Bonus
deferral. The notice must specify that 25%, 50%, 75% or 100% of the Bonus
is to be deferred. However, no deferral will be allowed in an amount less
than $2,500.00. If the Bonus with respect to which the election is made is
in an amount less than $2,500, the Participant's election under this
4
<PAGE>
Plan shall be ineffective and the Bonus shall be paid to the Participant in
the same manner as such Bonus would have been paid had no election been
made. In the event that the Bonus with respect to which the election is
made is $2500 or more, but the product of the elected deferral percentage
and the amount of the Bonus is less than $2500, then the amount deferred
and credited to the Participant's Account from such Bonus shall be $2500.
SECTION 4 - METHOD OF DEFERMENT
An amount equal to the Bonus or portion thereof which a Participant
has elected to have deferred shall be credited by the Company to an Account
in the name of the Participant on the date the Bonus subject to the
deferral election would otherwise be paid to the Participant. A separate
Account will be established for each deferred Bonus or portion thereof.
Interest equivalents will be credited to each Account quarterly on the last
day of each December, March, June and September. Interest equivalents
shall be computed based on the daily average of the prime commercial rate
(or its equivalent) in effect during each such quarter by Harris Trust and
Savings Bank and the average daily Balance in the Account during such
quarter. In the event there is a final distribution from an Account during
a calendar quarter, interest shall be credited with respect to such
distributed amount from the first day of the quarter through the day of
distribution.
SECTION 5 - ADDITIONAL ACCOUNT CREDITS
Upon the Termination of Service of a Participant (including a
Participant who has been paid the entire balance in his Accounts prior to
the date of such Termination of
5
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Service), the Company shall as soon as reasonably possible make a
calculation of the lump sum value (determined on the basis of the actuarial
assumptions specified in the Retirement Plan and as of the date of such
Termination of Service) of (i) the benefits payable to the Participant
under the Retirement Plan and the Supplemental Retirement Plan (jointly,
the "Covered Plans"), and (ii) the benefits which would have been payable
to the Participant under the Covered Plans had the Participant not elected
to defer any Bonus under this Plan. In the event that the lump sum value
of such benefits under (ii) above is greater than the lump sum value of
such benefits under (i) above, an amount equal to the amount of such excess
shall be credited to the Participant's Accounts as of the date of such
Termination of Service.
SECTION 6 - METHOD OF DISTRIBUTION
A. Subject to the following provisions of this Section 6, a
Participant shall be paid the balance in the Participant's Accounts in
cash, and in a single lump sum, on the fifteenth day of the first month
following the end of the deferral period or in January of the calendar year
following his or her Termination of Service other than on account of the
Participant's death, if earlier. In the event of the death of a
Participant, the balance in the Participants' Accounts shall be paid to the
Participant's Beneficiary in cash, and in a single lump sum, in January
following the calendar year of the Participant's death.
B. The foregoing notwithstanding, in the event a Participant's
Termination of Service is on account of disability or Retirement, such
Participant may elect to receive payment in installments over a period not
to exceed ten (10) years. Such election shall be made no later than
December 1 of the calendar year prior to the calendar year
6
<PAGE>
payment under paragraph A above would otherwise be made and shall be
irrevocable. If a Participant elects payment in installments, the
undistributed balance in such Participant's Account shall continue to be
credited with interest equivalents pursuant to section 4 above.
C. The foregoing notwithstanding, a Participant may, with the
consent of the Committee, elect to receive a distribution from the
Participant's Accounts in the event the Participant shall have suffered a
severe financial emergency or hardship as determined under guidelines
established by the Committee. A Participant who receives a distribution
under this paragraph C shall not be allowed to make a deferral election for
the Year in which such distribution is received or for any of the following
three Years.
D. The foregoing notwithstanding, the payment of any amount credited
to the Accounts of a Participant pursuant to Section 5 above may be
deferred by the Company for as long as may be reasonably necessary for the
Company to determine the amount of such credit. No amount shall be paid by
the Company pursuant to Section 5 above prior to the date that the
Participant or any of the Participant's beneficiaries commences to receive
benefits under the Retirement Plan. No amount shall be paid by the Company
pursuant to Section V above and the Participant shall have no right to any
such amount in the event that the Participant dies and no benefits under
the Retirement Plan are payable with respect to the Participant or any of
the Participant's beneficiaries.
7
<PAGE>
E. All payments made hereunder shall be net of all applicable
federal, state or local taxes which the Company is required to withhold
from such payments.
SECTION 7 - BENEFICIARIES
A. A Participant may, by giving notice to the Company during the
Participant's lifetime, designate (i) a Beneficiary or Beneficiaries to
whom distribution of any remaining Balances in such Participant's Accounts
will be made in the event of the Participant's death, and (ii) the specific
amounts or proportions of available Balances to be distributed to each such
designated Beneficiary if more than one Beneficiary is properly designated.
Any such designation may be revoked or changed by the Participant at any
time and from time to time by similar notice. If there is no such
designated Beneficiary living upon the death of the Participant or if all
such designated Beneficiaries die prior to distribution of all of a
Participant Balances under this Plan, any remaining distribution shall be
made to the Participant's surviving spouse or if none the then remaining
Balances will be distributed to the estate or personal representative of
the Participant.
B. If the Company, after reasonable inquiry, is unable within twelve
calendar months to determine whether any designated Beneficiary did in fact
survive the event that entitled such Beneficiary to receive distribution
under this Plan, it will be conclusively presumed that such Beneficiary did
in fact die prior to such event.
8
<PAGE>
SECTION 8 - COMMITTEE
This Plan will be administered by the Committee. Except as otherwise
expressly provided in this Plan, the Committee shall have full power and
authority, within the limits provided by this Plan:
(a) to construe this Plan and make equitable adjustments for any
mistakes or errors made in the administration of this Plan;
(b) to determine all questions arising in the administration of
this Plan, including the power to determine the rights of Participants
and their Beneficiaries and the amount of their respective interests;
(c) to adopt such rules and regulations as it may deem
reasonably necessary for the proper and efficient administration of
this Plan consistent with its purposes, specifically including, but
not by way of limitation, rules for determining what constitutes a
severe financial emergency or hardship for purposes of Section 6,
paragraph (C) above;
(d) to enforce this Plan in accordance with its terms and with
the rules and regulations adopted by the Committee; and
(e) to do all other acts which in its judgment are necessary or
desirable for the proper and advantageous administration of this Plan.
The Committee shall act by the vote or concurrence of a majority of
its members and shall maintain a written record of its decisions and
actions. All decisions and actions of the Committee pursuant to the
provisions of this Plan shall be final and binding upon all persons
affected thereby, and no member of the Committee shall take
9
<PAGE>
part in any decision regarding in any respect his or her interest under the
Plan. No member of the Committee shall have any personal liability to any
person, either as a member of the Committee or individually, for anything
done or omitted to be done in good faith in carrying out the provisions of
this Plan.
SECTION 9 - NON-ALIENATION
No right or benefit under this Plan shall be subject to anticipation,
alienation, sale, assignment, pledge, encumbrance or charge, and any
attempt to anticipate, alienate, sell, assign, pledge, encumber or charge
the same shall be void. No right or benefit under this Plan shall in any
manner be liable for or subject to the debts, contracts, liabilities or
torts of the person entitled to such benefits except such claims as may be
made by the Company or any affiliate.
SECTION 10 - PARTICIPANT'S RIGHTS
The establishment of the Plan shall not be construed as giving any
Participant the right to be retained as an employee of the Company or any
Subsidiary or the right to receive any benefits not specifically provided
herein. All amounts deferred and accrued under this Plan will be unsecured
liabilities of the Company. All Accounts shall be maintained for
bookkeeping purposes only and shall not represent a claim against any
specific assets of the Company or any affiliate. The Company shall have no
obligation to fund its obligations under this Plan. Nothing herein shall
be deemed to create a trust of any kind or to create any fiduciary
relationships.
10
<PAGE>
SECTION 11 - NOTICE
Any notice authorized or required to be given to the Company under
this Plan shall be deemed given upon delivery in writing, signed by the
person giving the notice, to the Secretary of the Company or such other
officer as may be designated by the Committee.
SECTION 12 - PLAN MODIFICATIONS
The Company may, at any time, terminate this Plan or may, from time to
time, amend any provision of this Plan in such manner and to such extent as
it may, in its sole discretion, deem to be advisable, provided that no
amendment, modification or termination of this Plan shall lessen a
Participant's rights with respect to the Balances in the Participant's
Accounts immediately prior thereto, without the Participant's consent. In
the event this Plan is terminated, any Balances remaining will be
distributed in such manner as is determined by the Committee in its sole
discretion.
SECTION 13 - APPLICABLE LAW
This Plan shall be governed by the laws of the State of Illinois and
the Employee Retirement Income Security Act of 1974, as amended, to the
extent applicable.
11
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EXHIBIT 10(c)
PEOPLES ENERGY CORPORATION
SUPPLEMENTAL RETIREMENT BENEFIT PLAN,
PART A, PART B AND PART C
SECTION 1
PURPOSE. It has been and is the intention of Peoples Energy Corporation
(the "Company") to maintain appropriate levels of benefits for individuals who
are entitled to benefits under the Peoples Energy Corporation Retirement Plan
("Retirement Plan") and under the Peoples Energy Corporation Employe Capital
Accumulation Plan ("CAP").
(a) Accordingly, effective October 1, 1976 the Board of Directors of the
Company, acting on behalf of the Company, established the Peoples Energy
Corporation Supplemental Retirement Benefit Plan ("Supplemental Plan"), which
Plan has been amended from time to time, and consists in its entirety of
Sections 1 through 17 hereof and Parts A, B and C attached hereto. This
Supplemental Plan is currently being amended and restated effective as of
January 1, 1994. This Supplemental Plan is applicable to the "Affiliated
Corporations" consisting of the Company and those other companies which from
time to time are deemed Affiliated Corporations under the Retirement Plan. Part
A hereof is intended to provide benefits to eligible persons who retire from all
employment with the Affiliated Corporations in such a manner as to maintain the
level of total retirement benefits which would otherwise be payable under the
Retirement Plan, but for the limitations on benefits imposed by Section 415 of
the Internal Revenue Code, as amended from time to time, and the regulations and
rulings thereunder or the terms of the Retirement Plan implementing those
limitations ("415 Limitation"), as indexed. Supplemental Plan Part A shall
maintain such total retirement benefit levels by means of supplemental unfunded
payments made
<PAGE>
by Affiliated Corporations to the individuals eligible for such payments as more
fully described in Sections A-1 and A-4 of Part A hereof. Supplemental Plan,
Part A is intended to be a plan described in Section 3 (36) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
(b) Effective October 1, 1994, Section 401(a)(17) of the Code precludes
the accrual of any further benefits under the Retirement Plan for any
participant therein based on annual compensation in excess of $150,000, as
indexed. Accordingly, effective October 1, 1994, the Board of Directors of the
Company acting on behalf of the Company, hereby amends the Peoples Energy
Corporation Supplemental Plan applicable to the Affiliated Corporations as set
forth in Part B hereof. Supplemental Plan, Part B is intended to maintain total
benefits payable under the Retirement Plan at the level which would have been
paid but for the restrictions imposed by Internal Revenue Code Section
401(a)(17), as amended from time to time, and the regulations and rulings
thereunder or the terms of the Retirement Plan implementing those limitations
("401(a)(17) Limitation"). Supplemental Plan, Part B shall maintain such total
retirement benefits by means of unfunded payments by the Affiliated Corporations
to the individuals eligible therefor as determined in Sections B-1 and B-4 of
Part B hereof. Supplemental Plan, Part B is intended to be a plan described in
Section 201(2) of ERISA.
(c) Effective January 1, 1994, Code Section 401(a)(17) also precludes the
recognition of any compensation in excess of $150,000 per year, as indexed, for
the purposes of the CAP. Accordingly, effective January 1, 1994, the Board of
Directors of the Company, acting on behalf of the Company, hereby amends the
Peoples Energy Corporation Supplemental Plan, Part C applicable to the
Affiliated Corporations as set forth in Part C hereof. This part of the Plan is
<PAGE>
intended to replace by cash payments the Employer Matching Contribution, as
defined in Section 4.01 of the CAP, which was not made to any Participant's
Employer Matching Contribution Account because the Participant's contributions
were limited by the operation of the 401(a)(17) Limitation or the CAP provisions
implementing such Limitation. The Supplemental Plan, Part C shall result in
cash payments to eligible employees as described in Sections C-1 and C-4 of Part
C hereof made by the Affiliated Corporations as soon as practicable after the
Committee, as prescribed in Section 2 below, determines the amounts payable to
the eligible employees.
SECTION 2
ADMINISTRATION BY RETIREMENT AND BENEFIT PLANS COMMITTEE. The Company
hereby delegates authority to administer the three parts of the Supplemental
Plan to the Retirement and Benefit Plans Committee (the "Committee") as
established pursuant to the provisions of the Retirement Plan. The Committee
shall have the same responsibility and authority with respect to the
Supplemental Plan, Parts A, B and C as it possesses with respect to the
Retirement Plan and the CAP. It shall also proceed with respect to the parts of
the Supplemental Plan in a manner consistent with the manner in which it
proceeds with respect to the Retirement Plan and the CAP.
SECTION 3
ESTABLISHMENT OF TRUST AND PAYMENT OF PART A BENEFIT AND PART B BENEFIT.
The Company shall establish a Trust Under Peoples Energy Corporation Executive
Deferred Compensation Plan and Supplemental Retirement Benefit Plan (the
"Trust"), with the intention that Part A Benefits and Part B Benefits will be
paid by the Trustee, to the extent available, from the assets in the Trust
contributed by the Company and accumulated in the Trust from time to time.
Notwithstanding the creation of the Trust, the Company may, at its discretion,
make payments of
<PAGE>
Part A and Part B Benefits directly to Part A and Part B Participants and Part A
and Part B Beneficiaries. The Committee shall furnish the Trustee a Payment
Schedule indicating the amounts payable and the dates when payments are due to
Part A Participants and Beneficiaries and Part B Participants and Beneficiaries
along with instructions as to the form and duration of such payments as provided
below. The Committee shall revise and maintain the Payment Schedule on a
current basis.
Except as otherwise provided, payment of Part A Benefits as determined
under Section A-4, and Part B Benefits as determined under Section B-4, which a
Part A or Part B Participant or Part A or Part B Beneficiary, as those terms are
defined below, is eligible to receive shall commence or be made at such time and
in the form of a life annuity, a contingent annuity with or without automatic
increase, a life and years certain annuity or a lump sum payment as the Part A
or Part B Participant shall elect under Part A or Part B, subject to the same
conditions as are prescribed for such options under the Retirement Plan
utilizing the option tables or actuarial present value factors utilized under
the Retirement Plan on the effective date of such Participant's election under
Part A or Part B, provided that, in the absence of any election as to the time
and form of payment of the Part A Benefit or the Part B Benefit, the Part A
Benefit or the Part B Benefit shall be paid at the same time and in the same
form and subject to the same conditions as the benefit is paid under the
Retirement Plan. If, because of reemployment by an Affiliated Corporation, the
payment of a Participant's benefits under the Retirement Plan is suspended, the
payment of Part A Benefits and Part B Benefits hereunder shall be suspended for
the same period of time.
<PAGE>
SECTION 4
OBLIGATION OF THE COMPANY.
(a) By the establishment of the Supplemental Plan, Part A and the
Supplemental Plan, Part B, the Company will provide, subject to the
qualifications and limitations set forth in Sections 5 and 6 below, a benefit
equal to the amounts determined in accordance with Parts A and B:
(i) to each Part A Participant and Part B Participant who is actively
employed or who shall have terminated service with all of the Affiliated
Corporations under conditions of entitlement to deferred or immediate
commencement of retirement annuity payments under the Retirement Plan, and
the amount of whose benefit entitlement qualifies the Part A Participant
and Part B Participant for Part A Benefits or Part B Benefits in accordance
with Section A-4 or B-4; and
(ii) to each Part A or Part B Beneficiary of a Part A or Part B
Participant whose death shall have occurred under circumstances entitling
the Part A or Part B Beneficiary to deferred or immediate commencement of
retirement payments under the terms of the Retirement Plan; provided,
however, that such Part A or Part B Beneficiary benefit payments qualify
the Part A or Part B Beneficiary for Part A Benefits in accordance with
Section A-4 or for Part B Benefits in accordance with Section B-4.
(b) As of any given time, the payment or further payment of benefits under
Part A or Part B shall be subject to cancellation, discontinuance or diminution
pursuant to Sections 5 and 6. It is the intent that benefits shall, to the
maximum extent permitted by law, be paid to Part A and Part B Participants and
Part A and Part B Beneficiaries under and pursuant to the terms of the
Retirement Plan and that termination, curtailment or reduction of benefit
payments under that
<PAGE>
Plan shall not result in commencement of or increase in Part A Benefits or Part
B Benefits hereunder. It is the further intent of Part A and Part B that a
Participant's benefits under such Parts shall not accrue nor become non-
forfeitable until such time as the payments from the Retirement Plan commence
to, or for the benefit of, a Participant following termination of the
Participant's employment for any reason or in the event of amendment or
termination of Part A or Part B causing amendment, curtailment, suspension,
discontinuance or termination of benefit payments as provided under Sections 3
and 4.
(c) By the establishment of Part C, the Company intends to provide for the
duration of Part C annual benefits to eligible employees equal to the amounts
determined in accordance with Part C to be paid to the eligible Part C
Participant or to the Part C Beneficiary of the Part C Participant whose death
shall have occurred prior to the payment of the Part C Benefit determined for
the year. Benefits under Part C do not become vested until the Committee has
made the determination of the amounts payable to the eligible employees.
SECTION 5
AMENDMENT TO CONFORM TO LAW. The Company, acting through its Board of
Directors, may by amendment make such changes in, additions to, and
substitutions for the provisions of Part A, Part B or Part C to take effect
retroactively or otherwise, as is necessary for the purpose of conforming any or
all of such Parts to any present or future law relating to plans of this or
similar nature, and to the administrative regulations and rulings promulgated
thereunder.
<PAGE>
SECTION 6
OTHER AMENDMENTS AND TERMINATION. The Company, acting through its Board of
Directors, may amend, curtail, discontinue or terminate Part A, Part B or Part C
at any time which it deems desirable. Notwithstanding the preceding sentence,
benefits under Parts A, B and C shall accrue and vest as of the later of the
date of adoption or effective date of any amendment, curtailment, suspension,
discontinuance or termination of any of the above Parts, whether or not such
benefits are in a pay status; provided that, in the event the Retirement Plan is
terminated or curtailed with the result that retirement payments to retired
employees and contingent and survivor annuity payments to beneficiaries are
discontinued or reduced, the Part A Benefits or Part B Benefits then being paid
or as such Benefits become payable in the future pursuant to such Part shall
similarly be discontinued or reduced in the same ratio as payments under the
Retirement Plan are discontinued or reduced.
SECTION 7
FORM OF AMENDMENT OR TERMINATION. Any amendment, termination,
discontinuance or reduction of payments shall be made by an instrument in
writing, duly certified, reflecting that said amendment, termination,
discontinuance or reduction of payments has been authorized by the Board of
Directors.
SECTION 8
NOTICE OF AMENDMENT OR TERMINATION. The Committee shall notify
Participants or Beneficiaries under any of the three Parts who are affected by
any such amendment, termination, discontinuance or reduction of payments within
a reasonable time thereof.
<PAGE>
SECTION 9
NO GUARANTEE OF EMPLOYMENT, ETC. Neither the creation nor the maintenance
of Part A, Part B or Part C nor anything contained therein shall be construed as
giving any Participant under any of the three Parts or other employees of any
Affiliated Corporation any right to remain in the employ of any Affiliated
Corporation.
SECTION 10
MERGER, CONSOLIDATION, ETC. No Affiliated Corporation will merge or
consolidate with any other corporation, including any other Affiliated
Corporation, nor liquidate or dissolve without making suitable arrangements for
the payment of any benefits under Part A, Part B or Part C regardless of whether
such benefits have accrued and vested under such Parts to any Participant and
any Beneficiary thereof.
SECTION 11
INALIENABILITY. Except so far as may be contrary to the laws of any state
having jurisdiction in the premises, a Participant or Beneficiary of any of the
three Parts shall have no right to assign, transfer, hypothecate, encumber,
commute or anticipate his or her interest in any payments under Part A, Part B
or Part C and such payments shall not in any way be subject to any legal process
to levy upon or attach the same for payment of any claim against any such
Participant or Beneficiary.
SECTION 12
INCOMPETENCY. If any Participant or Beneficiary of any of the three Parts
is, in the opinion of the Committee, legally incapable of giving a valid receipt
and discharge for any payment, the Committee may, at its option, direct that
such payment or any part thereof be made to such person or persons who in the
opinion of the Committee are caring for and supporting such
<PAGE>
Participant or Beneficiary unless it has received due notice of claim from a
duly appointed guardian or conservator of the estate of such Participant or
Beneficiary. A payment so made will be a complete discharge of the obligations
under Part A, Part B or Part C to the extent of and as to that payment, and
neither the Committee nor any Affiliated Corporation will have any obligation
regarding the application of the payment.
SECTION 13
NO REQUIREMENT TO FUND. Except as may be required by Section 10, no
provisions in Part A, Part B or Part C shall be construed to require, either
directly or indirectly, an Affiliated Corporation to reserve, or otherwise set
aside, assets for the payment of benefits thereunder.
SECTION 14
CONTROLLING LAW. To the extent not preempted by the laws of the United
States of America, the laws of the State of Illinois shall be the applicable and
controlling law in all matters relating to Part A, Part B or Part C.
SECTION 15
SEVERABILITY. If any provisions of Part A, Part B or Part C shall be held
illegal or invalid for any reason, said illegality or invalidity shall not
affect the remaining provisions of Part A, Part B or Part C but Part A, Part B
or Part C shall be construed and enforced as if said illegal and invalid
provisions had never been included therein.
SECTION 16
LIMITATIONS ON PROVISIONS. The provisions of Part A, Part B, or Part C and
any benefits payable under any of these Parts shall be limited as described
herein. Any benefit payable under the Retirement Plan or CAP shall be paid
solely in accordance with the terms and provisions of
<PAGE>
the Retirement Plan or the CAP, and nothing in Part A, Part B or Part C shall
operate or be construed in any way to modify, amend, or affect the terms and
provisions of the Retirement Plan or the CAP.
SECTION 17
GENDER AND NUMBER. Masculine gender shall include the feminine, the
singular shall include the plural, and the plural shall include the singular,
unless the context clearly indicates otherwise.
<PAGE>
PEOPLES ENERGY CORPORATION SUPPLEMENTAL
RETIREMENT BENEFIT PLAN, PART A, PART B AND PART C
PART A
SECTION A-1
PAYMENT OF PART A BENEFITS. Every individual who qualifies for a benefit
under the terms of the Retirement Plan either:
(a) as a Participant who, at the time of termination of active service
with all Affiliated Corporations, is or would be eligible for immediate or
deferred retirement payments; or
(b) as a Beneficiary of such a Participant,
as those terms are defined below, and whose benefit pursuant thereto is or would
be reduced by reason of the application of the 415 Limitation, shall be eligible
to receive an amount ("Part A Benefit") under this Part A as described in
Section A-4.
SECTION A-2
PARTICIPANT. Every individual described in Section A-1(a) above who is or
would be eligible to receive benefits under this Part A by reason of his or her
active service with all Affiliated Corporations shall be known as a "Part A
Participant".
SECTION A-3
BENEFICIARY. Every individual described in Section A-1(b) above who is or
would be eligible to receive benefits under this Part A by reason of another
individual's active service with the Affiliated Corporations shall be known as a
"Part A Beneficiary." The term Part A
<PAGE>
Beneficiary shall include spouses, heirs-at-law, legal representatives, and
every other person to whom benefits may be distributed, as determined under the
Retirement Plan.
SECTION A-4
AMOUNT OF SUPPLEMENTAL BENEFIT. The amount of Part A Benefit which a Part
A Participant or Part A Beneficiary shall be eligible to receive with respect to
each limitation year (as defined below) shall be equal to the excess, if any, of
the amount described in Section A-4(a) over the amount described in Section A-
4(b).
(a) The amount of annual benefit which would have been accrued with
respect to such Part A Participant or Part A Beneficiary as of the end of that
limitation year under the terms of the Retirement Plan as in effect on the last
day of that limitation year if such benefit were computed without giving effect
to the 401(a)(17) Limitation or the 415 Limitation for such year;
(b) The amount of the benefit which is the sum of
(i) the amount of the annual benefit which a Part A Participant or
Part A Beneficiary is entitled to receive under Part B; plus
(ii) the amount of annual benefit with respect to such limitation year
which was accrued for such Part A Participant or Part A Beneficiary under the
terms of the Retirement Plan as in effect on the last day of that limitation
year, including those terms implementing the 415 Limitation referred to above,
as indexed.
As used in the preceding provisions, the term "limitation year" means the
plan year which has been adopted in connection with the Retirement Plan, being
the period beginning on October 1 of each year and ending on September 30 of the
following year.
<PAGE>
It is the intent of this Section A-4 that the Part A Benefit as described
above shall be determined at all times in a manner consistent with the then
current 415 Limitation. Accordingly, the determinations made pursuant to this
Section A-4 shall be based upon adjustments employed in determining the amount
of annual benefit described above, and shall be subject to adjustments which
reflect the 415 Limitation with respect to the computation of benefits under the
Retirement Plan, including determining the effect on the amount of benefit
resulting from the death of the contingent annuitant in case the Part A
Participant has elected a contingent annuitant option with automatic increase,
or divorce if the contingent annuitant is a spouse. If a Part A Participant
receives a lump sum payment under the Retirement Plan, but has elected another
form of benefit under this Part A, the amount of the Part A Benefit payable in
each limitation year shall be the same as that payable in the year in which the
lump sum payment is made, subject only to (i) increase if the Part A Participant
has elected under this Part A the contingent annuitant option with automatic
increase and gives timely notice of the divorce from a spouse designated as the
contingent annuitant; or (ii) increase in the event of the death of a designated
contingent annuitant if the Part A Participant has also elected under this Part
A the option with automatic increase; or (iii) decrease by reason of a
contingent annuity becoming payable to a contingent annuitant upon the death of
the Part A Participant.
<PAGE>
SECTION A-5
RETIREMENT PLAN BENEFIT INCREASE AFTER TERMINATION OF ACTIVE SERVICE. In
the event the Retirement Plan is amended to increase the benefits payable to
existing annuitants and contingent annuitants, Part A Benefits shall be adjusted
or commenced accordingly for Part A Participants and Part A Beneficiaries;
provided that no such adjustment shall be made if the Participant received a
lump sum payment under this Part A.
<PAGE>
PEOPLES ENERGY CORPORATION SUPPLEMENTAL
RETIREMENT BENEFIT PLAN, PART A, PART B AND PART C
PART B
SECTION B-1
PAYMENT OF PART B BENEFITS. Every individual who qualifies for a benefit
under the terms of the Retirement Plan either:
(a) as a Participant who, at the time of termination of active service
with all Affiliated Corporations, is or would be eligible for immediate or
deferred retirement annuity payments; or
(b) as a Beneficiary of such a Participant,
as those terms are defined below and whose benefit pursuant thereto is or would
be reduced by the application of the 401(a)(17) Limitation shall be eligible to
receive an amount ("Part B Benefit") under this Part B as described in Section
B-4.
SECTION B-2
PARTICIPANT. Every individual described in Section B-1(a) above who is or
would be eligible to receive benefits under this Supplemental Plan B by reason
of his or her active service with all Affiliated Corporations shall be known as
a "Part B Participant".
SECTION B-3
BENEFICIARY. Every individual described in Section B-1(b) above who is or
would be eligible to receive benefits under this Part B by reason of another
individual's active service with the Affiliated Corporations shall be known as a
"Part B Beneficiary". The term Part B Beneficiary
<PAGE>
shall include spouses, heirs-at-law, legal representatives, and every other
person to whom benefits may be distributed, as determined under the Retirement
Plan.
SECTION B-4
AMOUNT OF PART B BENEFIT. The amount of Part B Benefit which a Part B
Participant or a Part B Beneficiary shall be eligible to receive with respect to
each plan year (as defined below) shall be equal to the excess, if any, of the
amount described in this Section B-4(a) over the amount described in this
Section B-4(b):
(a) The amount which such Participant or Beneficiary would be entitled to
receive under the Retirement Plan if the benefit were computed without giving
effect to the 401(a)(17) Limitation or the 415 Limitation;
(b) The amount of the annual benefit which such Part B Participant or Part
B Beneficiary is entitled to receive under the Retirement Plan if such benefit
were computed giving effect to the 401(a)(17) Limitation for such year but
without giving effect to the 415 Limitation for such year.
The term "plan year" shall mean the period beginning October 1 and ending
September 30 of the following year.
<PAGE>
PEOPLES ENERGY CORPORATION SUPPLEMENTAL
RETIREMENT BENEFIT PLAN, PART A, PART B AND PART C
PART C
SECTION C-1
PAYMENT OF PART C BENEFITS. Every individual who:
(a) in any calendar year is an active Participant in the CAP and who is
vested, as that term is defined in Article II of the CAP, in his or her Employer
Matching Contribution Account in the CAP; or
(b) as a Beneficiary of such a Participant,
as those terms are defined below, and the allocations to whose Employer Matching
Account for the year were reduced because of the individual's inability to make
the maximum Tax Deferred Regular Contributions or After Tax Regular
Contributions solely because of the 401(a)(17) Limitation ("Prevented
Contributions") shall be eligible to receive a Part C Benefit in the amount
determined pursuant to Section C-4. Any reductions in an individual's Tax
Deferred Regular Contributions and After Tax Regular Contributions by reason of
the operation of the 415 Limitation or the limitations imposed by reason of Code
Section 401(k)(3), Code Section 402(g) or Code Section 401(m) shall not be
deemed Prevented Contributions.
SECTION C-2
PART C PARTICIPANT. Every individual described in Section C-1(a) above
shall be known as a "Part C Participant" for such year.
<PAGE>
SECTION C-3
PART C BENEFICIARY. Every individual described in Section C-1(b) above who
is or would be eligible in any year to receive benefits under Part C by reason
of another individual's active Participation in the CAP shall be known as a
"Part C Beneficiary". The term shall include spouses, heirs-at-law, legal
representatives, and every other person to whom benefits may be distributed as
determined under the CAP.
SECTION C-4
AMOUNT OF PART C BENEFIT. The amount of Benefit which a Part C Participant
or Part C Beneficiary shall be eligible to receive with respect to each calendar
year shall be equal to 50% of the Part C Participant's Prevented Contributions
for such calendar year.
SECTION C-5
PAYMENT OF PART C BENEFIT. The Part C Benefit, if any, for each Part C
Participant, shall be determined and certified to the Affiliated Corporations by
the Committee each year and shall be paid as soon as practicable thereafter by
the Affiliated Corporations to each Part C Participant, if living, or, if not,
to the Part C Beneficiary.
<PAGE>
EXHIBIT 10(d)
RATE SCHEDULE FT
FIRM TRANSPORTATION SERVICE
FORM OF SERVICE AGREEMENT
CONTRACT NO. T-FTS-01335O
THIS AGREEMENT is made effective as of the 1st day of December, 1993, by
and between:
TRUNKLINE GAS COMPANY, (hereinafter called "Trunkline"), a Delaware
Corporation,
and
THE PEOPLES GAS LIGHT AND COKE COMPANY (hereinafter called "Shipper").
Shipper represents and warrants that Shipper conforms to the requirements of 18
C.F.R.
Section 284.102 (284B - Intrastate Pipelines or
Local Distribution Companies)
-------------
Section 284.222 (284G - Interstate Pipelines)
-------------
Section 284.223 (284G - Others) X
-------------
In consideration of the mutual covenants and agreements as herein set forth,
both Trunkline and Shipper covenant and agree as follows:
ARTICLE 1 - SERVICE
Trunkline agrees to receive at the Points of Receipt and deliver at the
Points of Delivery, on a firm basis, Quantities of Natural Gas up to the
following daily Quantity (Dt), which shall constitute the Maximum Daily
Quantity:
60,000 (Dt).
The Maximum Daily Quantity is stated in delivered Quantities, for which
received Quantities must be adjusted for fuel usage and lost or unaccounted for
Gas as set out in the then-effective, applicable rates and charges under
Trunkline's Rate Schedule FT.
Exhibit A hereto states the Points of Receipt and Points of Delivery.
Exhibit A may be revised from time to time by written agreement between
Trunkline and Shipper and, as may be revised, is by this reference incorporated
in its entirety into this Agreement and made an integral part hereof. Shipper's
Maximum Daily Quantity shall be assigned among the primary Points of Receipt set
out on Exhibit A, as well as among the primary Points of Delivery set out on
Exhibit A. Such assignment may be changed, subject to the availability of
capacity, in accordance with the General Terms and Conditions.
<PAGE>
RATE SCHEDULE FT (Continued)
FIRM TRANSPORTATION SERVICE
FORM OF SERVICE AGREEMENT
ARTICLE 2 - TERM
The term of this Agreement shall commence on 12/01/1993 and shall remain
effective for a primary term of 5 year(s) and thereafter shall continue in
effect until terminated by Trunkline or Shipper upon at least six (6) months
prior written notice to the other, as of any date not earlier than the date of
expiration of the primary term, provided that the term of this Agreement shall
be subject to applicable provisions of Section 11 of the General Terms and
Conditions.
Trunkline shall have the right to terminate service hereunder in the
following circumstances: (1) if 18 C.F.R., Part 284 of the Commission's
Regulations in effect on the date stated above is stayed, modified or overturned
by an appellate court or by the Commission in response to the order of an
appellate court; (2) if Trunkline terminates self-implementing transportation
under Section 311 of the NGPA or Section 7(c) of the Natural Gas Act on a
general, non-discriminatory basis; or (3) pursuant to any effective provisions
for termination of this Agreement by Trunkline as stated in Rate Schedule FT or
the General Terms and Conditions.
ARTICLE 3 - RATES AND CHARGES
For the services provided or contracted for hereunder, Shipper agrees to
pay Trunkline the then-effective, applicable rates and charges under Trunkline's
Rate Schedule FT filed with the Commission, as such rates and charges and Rate
Schedule FT may hereafter be modified, supplemented, superseded, or replaced
generally or as to the service hereunder. Trunkline reserves the right from
time to time to unilaterally file and to make effective any such changes in the
terms or rate levels under Rate Schedule FT and the applicability thereof, the
General Terms and Conditions or any other provisions of Trunkline's Tariff,
subject to the applicable provisions of the Natural Gas Act and the Commission's
Regulations thereunder.
ARTICLE 4 - FUEL REIMBURSEMENT
In addition to collection of the rates and charges provided for in Article
3, Trunkline shall retain, as Fuel Reimbursement, the percentage of the
Quantities delivered to Shipper hereunder, as provided pursuant to Rate Schedule
FT.
ARTICLE 5 - GENERAL TERMS AND CONDITIONS
This Agreement and all terms for service hereunder are subject to the
further provisions of Rate Schedule FT and the General Terms and Conditions of
Trunkline's Tariff, as such may be modified, supplemented, superseded or
replaced generally or as to the service hereunder. Trunkline reserves the right
from time to time to unilaterally file and to make effective any such changes in
the provisions of Rate Schedule FT and the General Terms and Conditions, subject
to the applicable provisions of the Natural Gas Act and the Commission's
Regulations thereunder. Such Rate Schedule and General Terms and Conditions, as
may be changed from time to time, are by this reference incorporated in their
entirety into this Agreement and made an integral part hereof.
<PAGE>
RATE SCHEDULE FT (Continued)
FIRM TRANSPORTATION SERVICE
FORM OF SERVICE AGREEMENT
ARTICLE 6 - CANCELLATION OF PREVIOUS CONTRACTS
This Agreement supersedes, cancels, and terminates, as of the date(s)
stated below, the following Agreement(s) (if any) with respect to the
Transportation of Natural Gas between Trunkline and Shipper:
T-FTS-012317
ARTICLE 7 - NOTICES
The Post Office addresses of both Trunkline and Shipper are as follows:
TRUNKLINE
Payment: Trunkline Gas Company
Attn: Cash Management
P. 0. Box 1311
Houston, Texas 77251-1311
Nomination and Scheduling: Trunkline Gas Company
Attn: Nominations and Allocations
P. 0. Box 1642
Houston, Texas 77251-1642
BUSINESS DAY, OR SATURDAY AND
SUNDAY 8 a.m. - 12 p.m. CT
Phone: (713) 627-5638
FAX: (713) 627-5636
ALL OTHER HOURS
Attn: Gas Control Operations
Phone: (713) 627-5621
Pipeline Emergencies: Trunkline Gas Company
(Not to be used for any other purpose) Attn: Gas Control
P. O. Box 1642
Houston, Texas 77251-1642
Phone: (713) 627-5621
Toll Free: 1-800-225-3913
Texas only: 1-800-221-1084
All Other: Trunkline Gas Company
Attn: Marketing Operations
P. O. Box 1642
Houston, Texas 77251-1642
Phone: (713) 627-4707
Fax: (713) 627-4752
<PAGE>
RATE SCHEDULE FT (Continued)
FIRM TRANSPORTATION SERVICE
FORM OF SERVICE AGREEMENT
SHIPPER
Billing: THE PEOPLES GAS LIGHT AND COKE COMPANY
122 S. MICHIGAN AVE., ROOM 915
CHICAGO, IL 60603
Attn: MR. ECKHARD BLAUMUELLER 312-431-7057
Nomination and THE PEOPLES GAS LIGHT AND COKE COMPANY
Scheduling: (1) 122 S. MICHIGAN AVE., ROOM 915
CHICAGO, IL 60603
Attn: MR. ANTHONY COMPTON 312-431-4157
All Other: THE PEOPLES GAS LIGHT AND COKE COMPANY
122 S. MICHIGAN AVE., ROOM 915
CHICAGO, IL 60603
Attn: MR. ECKHARD BLAUMUELLER 312-431-7057
(1) Please provide street address in addition to mailing address.
IN WITNESS WHEREOF, both Trunkline and Shipper have caused this
Agreement to be executed in several counterparts by their respective officers or
other persons duly authorized to do so.
THE PEOPLES GAS LIGHT AND COKE COMPANY
By: Thomas M. Patrick
-----------------
Title: Vice President
-----------------
EXECUTED /S/ Thomas M Patrick
--------------------
TRUNKLINE GAS COMPANY
By: /S/ G M RANA
-----------------
Title: VICE PRESIDENT
-----------------
EXECUTED 12-1-93
-----------------
<PAGE>
RATE SCHEDULE FT (Continued)
FIRM TRANSPORTATION SERVICE
FORM OF SERVICE AGREEMENT
EXHIBIT A
Transportation Agreement
For
Firm Service
Under Rate Schedule FT
Primary Points of Delivery
<TABLE>
<CAPTION>
Seq. Meter
No. Delivered To Location County State No. MDDO
- --- ------------- ----------- -------- -------- -------- ----
<C> <S> <C> <C> <C> <C> <C>
1 PEOPLES GAS (MANLO) 09 21N 07E CHAMPA IL 80601 60000
</TABLE>
Description of Facilities
<TABLE>
<CAPTION>
Atmos.
Seq. Existing/ Operated and Pres.
No. Proposed Zone Maintained by (Psia)
- --- -------- ---- ------------- -------
<C> <S> <C> <C> <C>
1 EXISTING Z-2 TRUNKLINE GAS 14.40
</TABLE>
Secondary Points of Delivery
Shipper shall have the secondary Points of Delivery as set forth in Section 2
of Trunkline's Rate Schedule FT.
<PAGE>
RATE SCHEDULE FT (Continued)
FIRM TRANSPORTATION SERVICE
FORM OF SERVICE AGREEMENT
EXHIBIT A
Transportation Agreement
For
Firm Service
Under Rate Schedule FT
Primary Points of Receipt
<TABLE>
<CAPTION>
MDRO
Seq. Meter (Net of Fuel
No. Received From Location County State No. Reimbursement)
- --- ------------------- -------------- ------- ----- ----- --------------
<C> <S> <C> <C> <C> <C> <C>
1 AMERADA HESS ST 20 S TIM 175 OFFSHO LA 82507 10000
2 VALERO BEE T BMLS A2&3 BEE TX 81729 30430
3 MOBIL (LA GLORIA ) I PENAA345 JIM WE TX 81582 19570
</TABLE>
Description of Facilities
<TABLE>
<CAPTION>
Atmos.
Seq. Existing/ Operated and Pres.
No. Proposed Zone Maintained by (Psia)
- --- -------- ---- ------------- ------
<C> <S> <C> <C> <C>
1 EXISTING FLD TRUNKLINE GAS 14.70
2 EXISTING FLD VALERO TRANSM 14.70
3 EXISTING FLD TRUNKLINE GAS 14.70
</TABLE>
Secondary Points of Receipt
Shipper shall have the secondary Points of Receipt as set forth in Section 2.2
of Trunkline's Rate Schedule FT.
<PAGE>
Contract No. 105580
NATURAL GAS PIPELINE COMPANY OF AMERICA (Natural)
TRANSPORTATION RATE SCHEDULE FTS AGREEMENT DATED February 01, 1994
UNDER SUBPART G of Part 284 OF THE FERC'S REGULATIONS
1. SHIPPER is: NORTH SHORE GAS COMPANY, a local distribution company.
2. MDQ totals: 104,180 MMBtu per day.
3. TERM: February 01, 1994 through November 30, 1995
4. Service will be ON BEHALF OF: [X] Shipper or [ ] Other: , a
5. The ULTIMATE END USERS are (check one):
[ ] customers of the following LDC/pipeline company(ies): ________________;
[ ] customers in these states:__________________________________________;
[X] customers within any state in the continental U.S.
6. [X] This Agreement supersedes and cancels North Shore's Firm Transportation
Agreement NOS. 103175 dated October 18, 1991; 104748 dated September 11,
1992; 104766 dated September 11, 1992; and 105580 dated December 01, 1993.
[ ] Capacity rights for this Agreement were released from ____________'s
Transportation Rate Schedule Agreement (KT #_____) dated _________ and are
subject to any recall/return provisions in ___________'s Capacity Release
Package ID # _____.
[X] (for firm service only) Service and reservation charges commence the
latter of:
(a) February 01, 1994, and
(b) the date capacity to provide the service hereunder is available on
Natural's System.
[ ] Other: _______________________________________________________________
7. SHIPPER'S ADDRESS Natural's ADDRESSES
GENERAL CORRESPONDENCE:
NORTH SHORE GAS CO. NATURAL GAS PIPELINE COMPANY OF AMERICA
ATTN: Eckhard Blaumueller Attention: Gas Transportation Services
122 S. Michigan Avenue 3200 Southwest Freeway 77027-7523
Room 915 P. O. Box 283 77001-0283
Chicago, Illinois 60603 Houston, Texas
STATEMENTS/INVOICES/ACCOUNTING RELATED MATERIALS:
NORTH SHORE GAS CO. NATURAL GAS PIPELINE COMPANY OF AMERICA
ATTN: Eckhard Blaumueller Attention: Gas Accounting Department
122 S. Michigan Avenue 701 East 22nd Street
Chicago, Illinois 60603 Lombard, Illinois 60148
PAYMENTS:
NATURAL GAS PIPELINE COMPANY OF AMERICA
Attention: Controller
701 East 22nd Street
Lombard, Illinois 60148
8. The above stated Rate Schedule, as revised from time to time, controls this
Agreement and is incorporated herein. The attached Exhibits A, B, and C
(for firm service only) are a part of this Agreement. NATURAL AND SHIPPER
ACKNOWLEDGE THAT THIS AGREEMENT IS SUBJECT TO THE PROVISIONS OF Natural's
FERC GAS TARIFF AND APPLICABLE FEDERAL LAW. TO THE EXTENT THAT STATE LAW
IS APPLICABLE, Natural AND SHIPPER EXPRESSLY AGREE THAT THE LAWS OF THE
STATE OF ILLINOIS SHALL GOVERN THE VALIDITY, CONSTRUCTION, INTERPRETATION
AND EFFECT OF THIS CONTRACT, EXCLUDING, HOWEVER, ANY CONFLICT OF LAWS RULE
WHICH WOULD APPLY THE LAW OF ANOTHER STATE. This Agreement states the
entire agreement between the parties and no waiver, representation, or
agreement shall affect this Agreement unless it is in writing. Shipper
shall provide the actual end user purchaser name(s) to Natural if Natural
must provide them to FERC.
AGREED TO BY:
NORTH SHORE GAS COMPANY NATURAL GAS PIPELINE COMPANY OF AMERICA
BY: /s/ Thomas M. Patrick BY:
------------------------------ -----------------------------------
NAME: Thomas M. Patrick NAME:
---------------------------- ---------------------------------
TITLE: Vice President TITLE:
---------------------------- --------------------------------
<PAGE>
Exhibit A
Dated FEBRUARY 01, 1994
Company: NORTH SHORE GAS COMPANY
CONTRACT: 105580
RECEIPT POINT/S
<TABLE>
<CAPTION>
County/Parish PIN
Name / Location Area State No. Zone MDQ(MMBtu)
--------------- ---- ----- --- ---- ----------
PRIMARY RECEIPT POINT/S
<S> <C> <C> <C> <C> <C>
1. ARKLA/NGPL HOT SPRING HOT SPRING AR 3853 01 5,180
INTERCONNECT WITH ARKLA ENERGY RESOURCES
ON TRANSPORTER'S GULF COAST MAINLINE IN
SEC. 22-T5S-R17W, HOT SPRING COUNTY,
ARKANSAS.
2. BRIDGEPORT PLT OUTLET MEC/NGPL WISE WISE TX 1850 02 5,000
AT THE TAILGATE OF THE MITCHELL ENERGY
BRIDGEPORT PLANT IN THE P. NICHOLAS,
A-654, WISE COUNTY, TEXAS.
3. ENRON/NGPL REFUGIO REFUGIO TX 6490 04 3,987
INTERCONNECT WITH ENRON CORP. LOCATED IN
THE JAMES POWER & JAMES HEWITSON SURVEY,
A-53, REFUGIO COUNTY, TEXAS.
4. LA GLORIA MOBIL/NGPL JIM WELLS JIM WELLS TX 439 04 8,164
AT OR NEAR THE TAILGATE OF MOBIL'S LA
GLORIA GAS PLANT ON TRANSPORTER'S LA
GLORIA-MOBIL LATERAL IN LOT #1, SUBD. OF
LANDS ADJ. TO TOWN OF LA GLORIA, JIM
WELLS COUNTY, TEXAS.
5. N BORDER/NGPL KEOKUK KEOKUK IA 8090 01 5,108
INTERCONNECT WITH NORTHERN BORDER
PIPELINE COMPANY ON TRANSPORTER'S
AMARILLO MAINLINE IN SEC. 30-T76N-R10W,
KEOKUK COUNTY, IOWA.
6. NGPL/NGPL C.S. 103 INLET FORD FORD KS 4987 O2 5,000
TRANSFER POINT FOR FIRM TRANSPORTATION
SERVICE FEEDER AGREEMENTS ON
TRANSPORTER'S AMARILLO MAINLINE IN SEC.
17-T29S-R24W, FORD COUNTY, KANSAS.
7. NGPL/NGPL C.S. 302 INLET MONTGOMERY MONTGOMERY TX 4988 04 24,000
TRANSFER POINT FOR FIRM TRANSPORTATION
SERVICE FEEDER AGREEMENTS ON
TRANSPORTER'S GULF COAST MAINLINE IN
BLOCK 21 OF THE B. PRUETT SURVEY, A-420,
MONTGOMERY COUNTY, TEXAS.
8. NNG/NGPL MILLS MILLS IA 203 01 5,000
INTERCONNECT WITH NORTHERN NATURAL GAS
COMPANY IN SEC. 26-T72N-R43W, MILLS
COUNTY, IOWA.
9. SABINEPL/NGPL HENRY PLT VERMILION VERMILION LA 3592 03 20,000
INTERCONNECT WITH SABINE PIPELINE
COMPANY'S GAS PLANT ON TRANSPORTER'S
LOUISIANA MAINLINE IN SEC. 21-T13S-R4E,
VERMILION PARISH, LOUISIANA.
</TABLE>
A-1
<PAGE>
Exhibit A (CONT'D)
Dated FEBRUARY 01, 1994
Company: NORTH SHORE GAS COMPANY
CONTRACT: 105580
RECEIPT POINT/S
<TABLE>
<CAPTION>
County/Parish PIN
Name / Location Area State No. Zone MDQ(MMBtu)
--------------- ---- ----- --- ---- ----------
PRIMARY RECEIPT POINT/S
<S> <C> <C> <C> <C> <C>
10. TRANSOK/NGPL INTER #2 BECKHAM BECKHAM OK 5556 02 9,892
INTERCONNECT WITH TRANSOK ON
TRANSPORTER'S OKLAHOMA EXTENSION
MAINLINE AT OR NEAR SEC. 26-T10N-R23W,
BECKHAM COUNTY, OKLAHOMA.
11. VALTRANS/NGPL JIM HOGG JIM HOGG TX 24001 04 2,849
INTERCONNECT WITH VALERO TRANSMISSION
CO. ON TRANSPORTER'S NORTHEAST
THOMPSONVILLE LATERAL IN THE NW QUADRANT
OF "LAS AMINAS" HRS. OF SAN FELIPE DE LA
PENA SURVEY, A-244, JIM HOGG COUNTY,
TEXAS
12. VALTRANS/NGPL INTER #2 TAP PANOLA PANOLA TX 3352 01 10,000
INTERCONNECT WITH VALERO TRANSMISSION
COMPANY ON TRANSPORTER'S GULF COAST
MAINLINE IN THE J.A. WILLIAMS SURVEY,
A-717, PANOLA COUNTY, TEXAS.
</TABLE>
SECONDARY RECEIPT POINT/S
All secondary receipt points, and the related priorities and volumes, as
provided under the Tariff provisions governing this Agreement.
RECEIPT PRESSURE, ASSUMED ATMOSPHERIC PRESSURE
Natural gas to be delivered to Natural at the Receipt Point/s shall be at a
delivery pressure sufficient to enter Natural's pipeline facilities at the
pressure maintained from time to time, but Shipper shall not deliver gas at
a pressure in excess of the Maximum Allowable Operating Pressure (MAOP)
stated for each Receipt Point. The measuring party shall use or cause to
be used an assumed atmospheric pressure corresponding to the elevation at
such Receipt Point/s.
RATES
Except as provided to the contrary in any written agreement(s) between the
parties in effect during the term hereof, Shipper shall pay Natural the
maximum rate and all other lawful charges as specified in Natural's rate
schedule applicable to this Agreement.
FUEL GAS AND GAS LOST AND UNACCOUNTED FOR PERCENTAGE (%)
Shipper will be assessed the applicable percentage for Fuel Gas and Gas
Lost and Unaccounted for.
TRANSPORTATION OF LIQUIDS
Transportation of liquids may occur at permitted points identified in
Natural's current Catalog of Receipt and Delivery Points, but only if the
parties execute a separate liquids agreement.
A-2
<PAGE>
Exhibit B
Dated FEBRUARY 01, 1994
Company: NORTH SHORE GAS COMPANY
CONTRACT: 105580
RECEIPT POINT/S
<TABLE>
<CAPTION>
County/Parish PIN
Name / Location Area State No. Zone MDQ(MMBtu)
--------------- ---- ----- --- ---- ----------
PRIMARY DELIVERY POINT/S
<S> <C> <C> <C> <C> <C>
1. NO SHORE/NGPL GRAYSLAKE LAKE LAKE IL 1 01 104,180
INTERCONNECT WITH NORTH SHORE GAS
COMPANY LOCATED IN SEC. 12-T44N-R10E,
LAKE COUNTY, ILLINOIS.
LAKE, IL
</TABLE>
SECONDARY DELIVERY POINT/S
All secondary delivery points, and the related priorities and volumes, as
provided under the Tariff provisions governing this Agreement.
DELIVERY PRESSURE, ASSUMED ATMOSPHERIC PRESSURE
Natural gas to be delivered by Natural to Shipper, or for Shipper's
account, at the Delivery Point/s shall be at the pressures available in
Natural's pipeline facilities from time to time. The measuring party shall
use or cause to be used an assumed atmospheric pressure corresponding to
the elevation at such Delivery Point/s.
B-1
<PAGE>
Exhibit C
PRIMARY TRANSPORTATION PATH SEGMENT MDQs
Dated FEBRUARY 01, 1994
Company: NORTH SHORE GAS COMPANY
CONTRACT: 105580
Pursuant to Natural's tariff, an MDQ exists for each primary transportation
path segment and direction under the Agreement. Such MDQ is the maximum daily
quantity of gas which Natural is obligated to transport on a firm basis along a
primary transportation path segment.
A primary transportation path segment is the path between a primary
receipt, delivery or node point and the next primary receipt, delivery or node
point. A node point is the point of interconnection between two or more of
Natural's pipeline facilities.
A map of Natural's pipeline system showing these primary transportation
path segment MDQs, and the direction to which each applies, is attached.
Exhibit C depicts the relevant portion, including compressor stations, of
Natural Gas Pipeline Company of America's transmission system, the primary
receipt and delivery points under the transportation agreement, the volumes
associated with each point, and the transportation path defined by the primary
receipt and delivery points. Exhibit C also specifies the Maximum Daily
Quantity under the transportation agreement.
C-1
<PAGE>
EXHIBIT 23
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report, dated November 2, 1994, included in this Form 10-K,
into Peoples Energy Corporation's previously filed Registration Statement
File Nos. 2-82760, 2-88307, 33-6369 and 33-6370.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
December 22, 1994
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED STATEMENTS OF INCOME, CONSOLIDATED STATEMENTS OF RETAINED
EARNINGS, CONSOLIDATED BALANCE SHEETS, CONSOLIDATED CAPITALIZATION
STATEMENTS, CONSOLIDATED STATEMENTS OF CASH FLOWS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-START> OCT-01-1993
<PERIOD-END> SEP-30-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $1,341,932
<OTHER-PROPERTY-AND-INVEST> $16,289
<TOTAL-CURRENT-ASSETS> $397,185
<TOTAL-DEFERRED-CHARGES> $53,880
<OTHER-ASSETS> 0
<TOTAL-ASSETS> $1,809,286
<COMMON> $276,120
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> $365,258
<TOTAL-COMMON-STOCKHOLDERS-EQ> $641,378
0
0
<LONG-TERM-DEBT-NET> $626,075
<SHORT-TERM-NOTES> $900
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> $4,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> $536,933
<TOT-CAPITALIZATION-AND-LIAB> $1,809,286
<GROSS-OPERATING-REVENUE> $1,279,488
<INCOME-TAX-EXPENSE> $32,053
<OTHER-OPERATING-EXPENSES> $1,145,619
<TOTAL-OPERATING-EXPENSES> $1,177,672
<OPERATING-INCOME-LOSS> $101,816
<OTHER-INCOME-NET> $19,829
<INCOME-BEFORE-INTEREST-EXPEN> $121,645
<TOTAL-INTEREST-EXPENSE> $47,246
<NET-INCOME> $74,399
0
<EARNINGS-AVAILABLE-FOR-COMM> $74,399
<COMMON-STOCK-DIVIDENDS> $62,573
<TOTAL-INTEREST-ON-BONDS> $44,234
<CASH-FLOW-OPERATIONS> $202,596
<EPS-PRIMARY> $2.13
<EPS-DILUTED> $2.13
</TABLE>
<PAGE>
EXHIBIT 99
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 2-82760
PEOPLES ENERGY CORPORATION
EMPLOYE STOCK PURCHASE PLAN
(Full title of the plan)
Peoples Energy Corporation
122 South Michigan Avenue
Chicago, Illinois 60603
(Name of issuer of the securities held pursuant to the plan and the address of
its principal executive office)
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This Form 11-K is being filed for informational purposes only.
ITEM 1. AN AUDITED STATEMENT OF FINANCIAL CONDITION AS OF THE END OF THE
LATEST TWO FISCAL YEARS OF THE PLAN.
Not applicable. Employes' payments for Company stock are neither
segregated nor held for investment.
ITEM 2. AN AUDITED STATEMENT OF INCOME AND CHANGES IN PLAN EQUITY FOR EACH OF
THE LATEST THREE FISCAL YEARS OF THE PLAN.
Not applicable. See above.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, Peoples
Energy Corporation has duly caused this annual report to be signed on its behalf
by the undersigned thereunto duly authorized.
Peoples Energy Corporation
Employe Stock Purchase Plan
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(Name of Plan)
By /s/ Emmet P. Cassidy
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Emmet P. Cassidy
Secretary and Treasurer
Peoples Energy Corporation
DECEMBER 15, 1994
Date
